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International Economics Archives - Page 12 of 23 - MBA Knowledge Base

Sectoral Demand-Shift Theory of Inflation

Under demand-pull inflation, we have shown how expansion in  aggregate  demand without a proportionate increase in the supply of goods and services leads to an inflationary situation. However, it is not necessary to have a general increase in demand to bring about inflationary pressure. Sometimes, the increase in demand may be confined to some sector of the economy and this increase in demand and the consequent rise in the price in a particular sector may spread to other sectors. Suppose the demand for agricultural goods rises because of inadequate supplies of these goods, there would be a consequent rise in the price of agricultural goods.… Read the rest

Measuring National Income – Three Methods of Measuring National Income and Output

National income can be defined as the part of the objective income of the community including income derived from abroad which can be measured in money i.e the money value of goods and services which is produced and made available for consumption in an economy for a particular period which is usually a year.  National income, also known as Gross Domestic Product (GDP) is very helpful to the economists to track the economic growth’s rate, average living standard in one country as well as the distribution of income between different groups of population (i.e. inequality gap).

For  measuring  the national income, the national economy is viewed as follows:

  • The national economy is considered as an aggregate of producing units combining different sectors such as agriculture, mining, manufacturing and trade and commerce.
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What is National Income?

National income is the final outcome of total economic activities of a nation. Economic activities generate two kinds of flow in a modern economy namely, product-flow and money-flow. Product-flow refers to flow of goods and services from producers to final consumers. Money flow refers to flow of money in exchange of goods and services. In this exchange of goods and services, money income is generated in the form of wages, rent, interest and profits, which is known as factor earning. Based on these two kinds of flows, national income is defined in terms of:

  • Product flow
  • Money flow
National Income in Terms of Product Flow

National income is the sum of money value of goods and services generated from total economic activities of a nation.… Read the rest

Conflicts with Firms Profit Maximization Objective

Profit  maximization  is the most popular hypothesis in economic analysis, but there are many other important objectives, which are not to be avoided by any firm. Modem business firms pursue multiple objectives.

An important aspect of profit is its use in measuring and controlling  performances  of the individuals of the large business firms. Researches have concluded that the business  individuals  of middle and top management often deviate from profit objective and try to  maximize  their own utility functions. They give importance to job security, personal ambitions for promotion, larger perks, etc. But this often conflicts with firms profit-making objective.

The reasons for conflicts are as follows:

  • More energy is spent in expanding sales volume and product lines than in raising profitability.
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Max Weber and Postmodernism Theory Concepts

It is not difficult to argue that Max Weber has outlived all his competitors in the classical tradition. His ideas have inspired scores of sociologists in a host of areas for more than sixty years. The contemporary vitality of these ideas is in no small measure due to the fact that he is the most prominent advocate of modernism and that he has both resisted and justified some of postmodernism’s most convincing criticisms of modern social science and society. When analysing the statement that “the fate of our times is characterized by rationalization, intellectualization and about all by the disenchantment of the world” one must look into all aspects of the 3 ways of thinking that Weber has described; rationalism, intellectualization and disenchantment.… Read the rest

Theories of International Investments

International investments mean investments beyond borders. International investments refer to investments by entities of a nation in nations other than their own. Foreign investments involve export of capital. The opportunity for International investments is directly emanating from economic reformist policies adopted by most of the countries of the world including centrally planned and command economies. Liberalization, Privatization and Globalization (LPG) are vigorously pursued by the countries giving an up-thrust on investment opportunities.

Broadly there are two types of foreign investment, namely, foreign direct investment (FDI) and foreign portfolio investment (FPI). FDI refers to investment in a foreign country where the investor retains control over the investment.… Read the rest