Economics Subject Matter Expert Interview Questions and Answers

Depreciation of exchange rate leads to increase in interest rate.

• Depreciation of exchange rate leads to inflationary pressure.

• Central banks increase interest rates to control inflation.

• Higher interest rates attract foreign investors, increasing demand for domestic currency.

• Examples: India increased interest rates in 2018 when rupee depreciated.

• Similarly, Turkey increased interest rates in 2021 when lira depreciated.

Opportunity cost is the value of the next best alternative forgone in order to pursue a certain action.

• Opportunity cost is a fundamental concept in economics.

• It refers to the cost of an alternative that must be forgone in order to pursue a certain action.

• For example, if you choose to spend money on a vacation, the opportunity cost is the value of the next best alternative use of that money, such as investing it or paying off debt.

• Opportunity cost can also be applied to time, ...read more

Fiscal stimulus refers to government policies aimed at increasing aggregate demand and stimulating economic growth.

• Fiscal stimulus involves increasing government spending or reducing taxes to boost economic activity.

• It is typically used during times of economic downturn or recession.

• Examples of fiscal stimulus measures include infrastructure spending, tax cuts, and direct cash transfers to individuals or businesses.

• The goal of fiscal stimulus is to encourage consumer spending...read more

Perfect price discrimination is a pricing strategy where a seller charges each customer the maximum price they are willing to pay.

• Seller charges different prices to different customers based on their willingness to pay

• Seller captures the entire consumer surplus

• Requires seller to have perfect information about each customer's willingness to pay

• Examples include car dealerships negotiating prices with customers and airlines charging different prices for the same seat based on de...read more