Acc121 Course Project

The company maintains a minimum cash balance of at least $50,000 at the end of each month. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.

D. the liquidation of currency in favour of precious metals as a hedge against inflation.

Throughout the majority of history, currency has had to either be equal to or greater than the value of what it was purchasing. This seems like a simple concept, but within the last fifty years this concept has gone out the window. Today, we all agree that pieces of paper hold value that they do not have, make coins that are not worth their value to produce, and act like it is sustainable. If we, as citizens of not only our nations but of the world, do not alter our course, there will be a massive failure of our system. No country is more pivotal in saving the world’s economy than the United States. The U.S. must change its monetary policy internally. If it does so, those benefits will spill over to

In general, an independent, transparent and credible central bank, “strong fiscal position”, sound financial system with rigorous regulation and supervision and flexible exchange rate is vital. Furthermore, a more effective strategy is supposed to “phase in” following successful disinflation (Mishkin, 2000, p.106-p.107).

According to CB approach, Value of money depends upon the supply of and demand for money. The value of money is at any time is fixed at the level at which it supplies equated to demand and the variations in its value through time arise out of the changes in its supply or its demand or both. This concept follows that the people in a community fix the amount of purchasing power that they wish to hold in the form of money. They thereby determine the aggregate purchasing power of money supply. Since the demand for money determines the aggregate purchasing power of money supply, it follows that, with a given demand, the purchasing power of each unit of money varies inversely and the price level directly, with the quantity of money

Essay question: History shows us that attempts to fix exchange rates or create monetary unions between different countries usually end in failure. Therefore, we should not be surprised by the current problems in the Euro Zone. Discuss

Monetary instability leads to large and unpredictable changes in the money supply whereby central banks attempt to monetize the debt through increasing interest rates which result in higher inflation. Inflation is the logical outcome of an expansion of the money supply in excess of real output growth. It also reflects erosion in the purchasing power of money – a loss of real value in the internal medium of

Assessing the merits of the paper, it explores an interesting and crucial phenomenon which can further be developed to create several other hypothesis and lead to revelations in the macroeconomic and monetary front. Hence, it is significant to its field and also appropriate for the Journal of International Money and Finance.

a large real appreciation in the currency (taking the form of nominal currency appreciation if the country has a floating exchange rate or the form of money inflows and inflation if the country has a fixed exchange rate);

On the other hand, the Relative and Ex Ante PPP implies that exchanged rate between two countries is affected by their inflation rates and expressed as (CFA, 2015). In the long-run, the relative PPP predicts that countries with a low inflation rate have currency’s that tend to appreciate and conversely with countries that have a high inflation rate; and the % change in exchange rate will equal the % difference in national inflation rates (Baffes, 1991; Taylor and Taylor, 2004).

Dual aspect may be stated as "for every debit, there is a credit." Every transaction should have twofold effect to the extent of the same amount. This concept has resulted in accounting equation which states that at any point of time the assets of any entity must be equal (in monetary terms) to the total of equities. In other words, for every business enterprise, the sum of the rights to the properties is equal to the sum of the properties owned. The properties of the business are called "assets". The rights to the properties are called "equities". Equities may be sub-divided into two principle types: The rights of the creditors and the rights of the owners. The

But the question of how stable money demand actually is provides a crucial element in the discussion of how monetary stabilization policy should be employed. A stable money demand function would provide the Bank of Canada with a good guide for making decisions on how fast to expand money supply in order to hit its inflation targets while supporting a desired growth path of GDP. A stable demand function also provides the opportunity for management of the money supply through short-run interest rate control policy.

where M is the amount of currency in the economy during a given year, V is the velocity of circulation of money, M’ is the volume of demand deposit in the economy during the year, V’ is the velocity of circulation of demand deposits, and is the sum of (i) the average price, P, of a commodity purchased in the economy during the given year multiplied by the quantity, Q ,of it purchased, (ii) the average price, , P’ of another commodity purchased during the given year multiplied by the quantity of it purchased, and (iii) for all

The project attempts to study the major question, namely whether or not the absolute purchasing power parity (APPP) and

The standard ensured minimal inflation, and also ensured countries maintained adequate reserves of gold to back its currency’s value. However the stability caused by the Gold Standard did not allow exchange rates to respond to changes in trade circumstances between countries, such as higher imports. At national level, gold could be acquired by official authorities. Mayer et al (1990) outlined that there was no reason to believe that growth in the world’s gold stock and money supply would be slow and stable. There were expected gold discoveries and/or technological advancement which triggered wave of inflation.