Hicks-Hansen Synthesis: IS-LM Curve Model
From various theories like classical theory, loanable-fund theory, neo-classical theory of Pigou, and determining the rate of interest put forward from time to time, we have seen that all these theories suffer from various drawbacks and are indeterminate. The Keynesian theory considered only the monetary factors and the classical theory only the real factors as…
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RBI notifies revised guidelines for foreign currency notes changing activities
In terms of Section 10 (1) of FEMA 1999, RBI may authorize Full Fledged Money Changers (FFMCs)/non-bank Authorised Dealers (ADs) Category-II to deal in foreign exchange as an authorised dealer, money changer, or off-shore banking unit or in any other manner as it deems fit. In terms of extant instructions, these authorized dealers may obtain…
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Keynes’ Liquidity Preference and other theories of interest
(This article elucidates Keynes’ Liquidity Preference Theory of Rate of Interest, Money Demand Determination of Rate of Interest: Equilibrium in the Money Market, Effect of an Increase in the Money in Money Demand or Liquidity Preference Curve, The Liquidity Preference Theory, proposed by John Maynard Keynes, explains interest rate determination based on people’s preference for…
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The classical theory of the rate of interest
Economists like Ricardo, J. S. Mill, Marshall, and Pigou developed the classical theory of interest which is also known as the capital theory of interest, the saving-investment theory of interest, or the real theory of interest. In the classical theory, the equilibrium rate of interest is the one that equals the supply of loanable funds…
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RBI announces premature redemption of Sovereign Gold Bonds @ ₹7296/-
The Reserve Bank of India (RBI) has declared the early redemption price for Sovereign Gold Bonds (SGBs) from the SGB 2017-18 Series IX-Issue date of November 27, 2017.The redemption price of SGB shall be based on a simple average closing gold price of 999 purity of the previous three business days from the date of…
Impact of Inflation on the Economy
In an inflationary atmosphere, unevenly rising prices inescapably reduce the purchasing power of some consumers, which can lead to erosion of real income. Some people, who purely live on interest income such as retirees, may find it challenging to keep up with rising prices, potentially diminishing their purchasing power. When prices rise, each unit of…
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