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Showing posts with the label trade balance

Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Balance of Payments:A Note

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  Countries rarely can exist in isolation. There is certain degree of interdependence across countries. Hence cross border transactions are a norm. these transactions manifest in many ways. There would be export of goods in exchange for which foreign currency is received. There are import of goods which have to be paid in foreign currency. There are remittances from domestic residents who would be currently working abroad. There would be banking transactions across border. Firms would invest in assets overseas. All these transactions that have an element of cross-border interaction are recorded in a statement what is popularly as balance of payments. Thus as is obvious, balance of payments (BoP) points to the records of all cross border transactions undertaken by a country in a given period of time. This might be prepared monthly, quarterly, half-yearly or annually.   Scenarios wherein demand for domestic currency exceeds that of the supply of domestic currency results in a surplus
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