Macroeconomics, 2nd Edition by Pearson

182

MACROECONOMICS

NOTES

1.

If all goods are expressed in terms of money and money is

the unit of account, then only

n

different absolute prices

for the different goods need to be recorded. If

P

i

(

i

=

1

, … , n

)

denotes absolute price for good

i,

then the implied rela-

tives prices are

P

i

/

P

j

.

If there was no unit of account, in an

economy with

n

goods we would need to record

n

(

n –

1)/2

distinct relative prices which can be a fairly large number.

2.

The present value of the amount INR 1 that is to be

received at time

t

is given by exp {

-



0

t

r

(

s

)

ds

}

.

3.

We are assuming the market value ...