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Yogita Ingle 6 years, 7 months ago
Devaluation is fall in the value of domestic currency in relation to foreign currency as planned by the Central Bank in a situation, when exchange rate is not determined by market forces of demand and supply. Depreciation of domestic currency occurs when the value of domestic currency decreases in relation to the value of other currencies under flexible exchange rate system, as determined by the market forces of demand and supply, e.g. if US $ exchanges for Rs 60 instead of Rs 55 earlier, the domestic currency (Indian rupee). has shown depreciation.
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Yogita Ingle 6 years, 7 months ago
Three features of monopolistic competition are as follows:
(i) Large number of buyers and sellers As under perfect competition, in this form also, there are a large number of buyers and sellers. Also, the size of each firm is small. Each firm has a limited share of the market.
(ii) Product differentiation It is a distinct feature of monopolistic competition. A product is often differentiated by way of trademarks and brand
. names. The differentiated products are close substitutes of each other, like Colgate and closeup toothpaste. Because of product differentiation, each firm can decide its price policy independently, so that each firm has a partial control over price of its product.
(iii) Selling cost Each firm has to incur selling costs (expenditure on advertisement, etc) to promote its sales. This is because there are a large number of close substitutes available in the market.
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Yogita Ingle 6 years, 7 months ago
The level of aggregate demand required to achieve full employment equilibrium is called effective demand. Alternatively, aggregate demand at the point of equilibrium is called an effective demand. How? Equilibrium level of national income is determined by aggregate demand and aggregate supply which become rarely equal. The particular aggregate demand which is equal to aggregate supply and determines the equilibrium national income is called effective demand. Effective demand is the total expenditure which the people are prepared to spend for purchase of goods and services.
In Keynesian framework which deals with short run analysis, it is assumed that prices of goods do not change and elasticity of supply is infinite. At the given price, output can be increased till all resources are fully employed. How much will be the aggregate output will primarily depend on how much is the aggregate demand in the economy. Thus aggregate output is determined solely by aggregate demand principle. This is called effective demand principle. Also because in short run, physical and technical conditions affecting aggregate supply do not change, so it is the level of effective demand or aggregate demand which determines the level of output, income and employment. Thus for increasing the level of income and employment, increase in effective demand is essential.
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Charu Gautam 6 years, 7 months ago
1Thank You