M
maz1987
Member
Am I using this forum too much? I don't see how there are so many people doing this exam and yet just a handful of people utilising this forum. Anyway, even so I appreciate the help I am getting here.
I have a question (or two) regarding question 10 of the Sept 2009 paper.
Firstly, I found this a pretty tough paper, but not impossible. It's very dissimilar to previous (and subsequent) papers.
Anyway, in Q10 we are told that costs and benefits become zero through the carbon technology. Therefore, when working out the equation of value, the first two costs are now considered benefits. But why just these two costs and not the third cost, nor the benefit is now considered a loss? Surely the fact that the $40bn is also a saving, while the $10bn gets lost because of crops/heating.
Secondly, we are told the Real Rate = 4%, we are led to assume inflation is 1% (although I only knew this from looking at the answers) and therefore the Money Rate is 2.97%. The formula used is:
1 + MR = (1 + RR) / (1 + Infl)
However the notes tells us that
1+ MR = (1 + RR) x (1 + Infl).
So what am I missing? Could it be that 2.97% isn't really the Money Rate, and is in fact another rate? And also, why does the inflation only apply to the $20bn, and nothing else?
Thanks
I have a question (or two) regarding question 10 of the Sept 2009 paper.
Firstly, I found this a pretty tough paper, but not impossible. It's very dissimilar to previous (and subsequent) papers.
Anyway, in Q10 we are told that costs and benefits become zero through the carbon technology. Therefore, when working out the equation of value, the first two costs are now considered benefits. But why just these two costs and not the third cost, nor the benefit is now considered a loss? Surely the fact that the $40bn is also a saving, while the $10bn gets lost because of crops/heating.
Secondly, we are told the Real Rate = 4%, we are led to assume inflation is 1% (although I only knew this from looking at the answers) and therefore the Money Rate is 2.97%. The formula used is:
1 + MR = (1 + RR) / (1 + Infl)
However the notes tells us that
1+ MR = (1 + RR) x (1 + Infl).
So what am I missing? Could it be that 2.97% isn't really the Money Rate, and is in fact another rate? And also, why does the inflation only apply to the $20bn, and nothing else?
Thanks