Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN: 9781285165912
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 13, Problem 1QCMC
To determine
The difference between the Stock and the Bond.
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Which of the following situations represent investment or saving? Explain.
Your family takes out a mortgage and buys a new house.
You use your $200 paycheck to buy stock in AT&T.
Your roommate earns $100 and deposits it in his account at a bank.
You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.
For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain.
A bond that repays the principal in year 2030 or a bond that repays the principal in year 2040. 2 . A bond from Coca-Cola or a bond from a software company you run in your garage.
If I had a federal budget that was typically balanced where new taxes causes $100 billion surplus. What would happen to the interest rates? and do saving and investments change because of it?
Which of the following would both make the interest rate on a bond higher than otherwise?
a.
the interest it pays is tax exempt and it is short term
b.
the interest it pays is tax exempt and it is long term
c.
the interest it pays is taxed and it is long term
d.
the interest it pays is taxed and it is short term
Chapter 13 Solutions
Principles of Macroeconomics (MindTap Course List)
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Similar questions
- Based on current information on the U.S. stock market and the debt markets, including interest rates: (a) would you recommend that a firm raise funds through borrowing or by issuing stock? (b) would you recommend that a household build wealth by investing in the stock market or in real estate? Explain your answers to a. and b. Hint: You may begin with general information about current developments in the equity and debt markets, and the discuss how firms and households may use this information to make short-term and long-term financial decisions.arrow_forwardFor each of the following pairs, which bond would you expect to pay a higher interest rate? Explain! a bond of the U.S. government or a bond of an East European government a bond that repays the principal in year 2015 or a bond that repays the principal in year 2040 a bond from Coca-Cola or a bond from a software company you run in your garage a bond issued by the federal government or a bond issued by New York State 2. Many workers hold large amounts of stock issued by the firms at which they work. Why do you suppose companies encourage this behavior? Why might a person not want to hold stock in the company where he works? 3. Economists in Funlandia, a closed economy, have collected the following information about the economy for a particular year: Y = 10,000; C = 6,000; T = 1,500; G = 1,700. The economists also estimate that the investment function is: I =3,300 –100r where r is the country’s real interest rate, expressed as a percentage. Calculate private saving, public saving,…arrow_forward
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