What is the implication of the opportunity cost curve being (i) convex ;( II) Concave; and (III) a straight line

 The implication of the opportunity cost curve being convex, concave and a straight line are given below--------

 •    Convex: (Increasing Cost) this is the standard convex production possibilities curve with increasing opportunity cost. Because it best reflects the economy, it is the one most commonly seen throughout the study of economics. In this case the economy foregoes increasing amounts of one good when producing more of the other.

 •    Straight Line: (Constant Cost): This is a straight line production possibility "curve" that indicates constant opportunity cost. In this case, opportunity cost does not change with production. This is not a realistic reflection of the entire economy, but it can represent the production of some goods. Here the economy foregoes the same amount of one good when producing more of the other.

•    Concave: (Decreasing Cost ): This is concave production possibilities curve with decreasing opportunity cost. In this case, opportunity cost actually decreases with greater production. While opportunity cost can decrease in limited circumstances, this is unlikely to happen for the economy as a whole. To do so would contradict the assumption of technical efficiency and it is contrary to real world  observations.  In this case the economy foregoes decreasing amounts of one  good when producing more of the other. 

What measures would you suggest to solve the problem of balance of payment deficit in Bangladesh

 A country's balance of payments reflects its net earnings on trade in goods and services with other countries. A positive balance of payments situation, or a surplus, comes about when a country exports more than it imports. A deficit situation arises when a country imports more than it exports. Governments manage their balance of payments situations in accordance with their larger goals for the economy.

  Increased Exports

  •    One way of reducing a balance of payments deficit situation is to export more to other countries. For instance, in July 2010, the U.S. goods and services deficit went down to

$42.8 billion, from $49.8 billion in June 2010. This came about as the country's exports rose to $153.3 billion in July, from $104.9 billion in June 2010. As the global recession abated, there was more demand for U.S. exports in other countries and this led to the rise in exports, according to the U.S. Census Bureau.

 Decreased Imports

 •    Another way of reducing a balance of payments deficit is to import less from other countries. In July 2010, U.S. imports decreased to $196.1 billion, from $200.3 billion in June 2010, according to the U.S. Census Bureau. A slow U.S. recovery from the recession of 2007 meant that U.S. consumers were consuming fewer goods, including imported goods. This too causes a country's balance of payments deficit to go down.

 Government Policy

 •   Another factor that impacts a country's balance of payments situation is trade policies relating to specific countries. If a country has a protectionist trade policy, it has various ways of making imports more expensive. For instance, a government could levy a tax or tariff on imported goods. This makes the goods more expensive to its citizens who might then opt to buy local goods over the more expensive imported goods. This tends to reduce a country's balance of payments deficit. Countries also have various mutual trade agreements with other countries, whereby they could give preferred treatment to each other's products for import purposes. Such government policies impact a country's

How monetary policy can be used to control inflation

 Monetary policy, to a great extent, is the management of expectations.[4]  Monetary policy rests on the relationship between the rates of interest in an economy, that is, the price at

which money can be borrowed, and the total supply of money. Monetary policy uses a variety of tools to control one or both of these, to influence outcomes like  economic growth,

inflation, exchange rates with other currencies and  unemployment. Where currency is under a monopoly of issuance, or where there is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authority has the ability to alter the money supply and thus influence the interest rate (to achieve policy goals). The beginning of monetary policy as such comes from the late 19th century, where it was used to maintain the gold standard.

 

A policy is referred to as contractionary if it reduces the size of the money supply or increases it only slowly, or if it raises the interest rate. An expansionary policy increases the size of the money supply more rapidly, or decreases the interest rate. Furthermore, monetary policies are described as follows: accommodative, if the interest rate set by the central monetary authority is intended to create economic growth; neutral, if it is intended neither to create growth nor combat inflation; or tight if intended to reduce inflation.

 

There are several monetary policy tools available to achieve these ends: increasing interest rates by fiat; reducing the  monetary base; and increasing  reserve requirements. All have the effect of contracting the  money supply; and, if reversed, expand the money supply. Since the

1970s, monetary policy has generally been formed separately from fiscal policy. Even prior

to the 1970s, the  Bretton Woods system still ensured that most nations would form the two policies separately.

 

Within almost all modern nations, special institutions (such as the Federal Reserve System in the United States, the  Bank of England, the European Central Bank, the  People's Bank of China, the Reserve Bank of New Zealand, and the  Bank of Japan) exist which have the task of executing the monetary policy and often independently of the  executive. In general, these institutions are called  central banks and often have other responsibilities such as supervising the smooth operation of the financial system.

 

The primary tool of monetary policy is open market operations. This entails managing the quantity of money in circulation through the buying and selling of various financial instruments, such as treasury bills, company bonds, or foreign currencies.

 

Usually, the short term goal of open market operations is to achieve a specific short term interest rate target. In other instances, monetary policy might instead entail the targeting of a specific exchange rate relative to some foreign currency or else relative to gold.

 

The other primary means of conducting monetary policy include: (i) Discount window lending (lender of last resort); (ii) Fractional deposit lending (changes in the reserve requirement); (iii)  Moral suasion (cajoling certain market players to achieve specified outcomes); (iv) "Open Mouth Operations" (talking monetary policy with the market).