Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
expand_more
expand_more
format_list_bulleted
Question
Chapter 25, Problem 23APA
To determine
Determine the changes in the bonds when the real
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
In the 2000s savings and loans institutions significantly increased the number of subprime mortgages they offered. Note: subprime mortgages are loans to people who have not-so-good credit and/or ability to make loan payments for home purchases. After the 2008-09 recession they became much less common.
why subprime mortgages are or are not good for the country and the individuals who take these mortgages? What are the positive and negative effects?
Suppose the government borrows $20 million more next year than this year.
What happens to investment? To private savings? To public savings? To national savings?
How does the elasticity of the supply of loanable funds affect the size of these changes?
How does the elasticity of the demand of loanable funds affect the size of these changes?
Three student have each saved $1,000. Each has an investment opportunity in which he or she can invest up to $2,000. Here are the rates of return on the students' investment projects:
Harry 5 percent
Ron 8 percent
Hermione 20 percent
Now suppose the school opens up a market for loanable funds in which students can borrow and lend among themselves at an interest rate r. What would determine whether a student would choose to be a borrower or lender in this market?
Chapter 25 Solutions
Macroeconomics
Ch. 25.1 - Prob. 1RQCh. 25.1 - Prob. 2RQCh. 25.1 - Prob. 3RQCh. 25.1 - Prob. 4RQCh. 25.1 - Prob. 5RQCh. 25.2 - Prob. 1RQCh. 25.2 - Prob. 2RQCh. 25.2 - Prob. 3RQCh. 25.2 - Prob. 4RQCh. 25.2 - Prob. 5RQ
Ch. 25.3 - Prob. 1RQCh. 25.3 - Prob. 2RQCh. 25.3 - Prob. 3RQCh. 25.3 - Prob. 4RQCh. 25.3 - Prob. 5RQCh. 25.4 - Prob. 1RQCh. 25.4 - Prob. 2RQCh. 25.4 - Prob. 3RQCh. 25.5 - Prob. 1RQCh. 25.5 - Prob. 2RQCh. 25.5 - Prob. 3RQCh. 25.5 - Prob. 4RQCh. 25.5 - Prob. 5RQCh. 25.6 - Prob. 1RQCh. 25.6 - Prob. 2RQCh. 25.6 - Prob. 3RQCh. 25.6 - Prob. 4RQCh. 25 - Prob. 1SPACh. 25 - Prob. 2SPACh. 25 - Prob. 3SPACh. 25 - Prob. 4SPACh. 25 - Prob. 5SPACh. 25 - Prob. 6SPACh. 25 - Prob. 7SPACh. 25 - Prob. 8SPACh. 25 - Prob. 9SPACh. 25 - Prob. 10APACh. 25 - Prob. 11APACh. 25 - Prob. 12APACh. 25 - Prob. 13APACh. 25 - Prob. 14APACh. 25 - Prob. 15APACh. 25 - Prob. 16APACh. 25 - Prob. 17APACh. 25 - Prob. 18APACh. 25 - Prob. 19APACh. 25 - Prob. 20APACh. 25 - Prob. 21APACh. 25 - Prob. 22APACh. 25 - Prob. 23APACh. 25 - Prob. 24APACh. 25 - Prob. 25APACh. 25 - Prob. 26APACh. 25 - Prob. 27APA
Knowledge Booster
Similar questions
- When the government raises taxes on businesses, the price of bonds _______ and the yield on bonds ________, all else equal. falls; falls rises; rises falls; rises rises; fallsarrow_forwardUsing a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if: a reduction in military spending moves the government’s budget from deficit into surplus.arrow_forwardHouseholds use money on which of the following ways? A) wages, saving, spending B) Public Goods and services, Private goods and Services, Spending C) Rent, Spending, Taxes D) Spending, taxes, savingarrow_forward
- Claire inherited a bunch of random stuff from her grandmother, including a pile of dusty old government bonds. Claire decided to redeem all her government bonds and got a huge windfall of $100,000 in cash. Because of this windfall, Claire has decided to pursue her dream, and take two years off from her job to write a novel. Claire has to think about her budget for the year. She needs to be able to live off her windfall for both years. If she saves some money in the first year, she receives a return of r percent on her savings. Claire will need to pay an ad valorem capital tax, tK, on her windfall income. She will also need to pay an ad valorem consumption tax, tC, on whatever she consumes.1 In addition, because she isn’t working, Claire will get a tax credit of T dollars from the government. Write and explain Claire’s budget constraint for her two-year sabbatical. Use a graph to explain how every additional step changes her budget constraint. Remember to integrate the math with your…arrow_forwardCongress passed the CARES Act to provide an economic safety net during the Covid-19 pandemic shutdown. The CARES Act included stimulus checks that were sent to some households. Households with individuals making up to $75,000 received a $1,200 check and households with married couples making up to $150,000 received a $2,400 check. Think about how the savings rate varies with household income and the utility of savings versus spending when answering the questions below. 1. Explain why Congress only sent stimulus checks to households up to a certain income level. 2. Does this program make sense given the fact that there is a severe economic downturn? Why or Why not?arrow_forwardOther things the same, an increase in the budget deficit A. shifts the supply of loanable funds left, so the interest rate rises. B. shifts the demand for loanable funds right, so the interest rate rises. C. shifts the demand for loanable funds left, so the interest rate falls. D. shifts the supply of loanable funds right, so the interest rate falls.arrow_forward
- Suppose that the city of New York issues bonds to raise money to pay for a new tunnel linking New Jersey and Manhattan. An investor named Susan buys one of the bonds on the same day that the city of New York pays a contractor for completing the first stage of construction. Is Susan making an economic or a financial investment? What about the city of New York?arrow_forwardSuppose the government borrows $20 billion more next year than this year. a. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? b. What happens to investments?To private savings?To public savings?To national savings? Compare the size of the changes to the $20 billion of extra government borrowing. c.How does the elasticity of supply of loanable funds affect the size of these changes? d. How does the elasticity of demand of loanable funds affect the size of these changes?arrow_forwardChairman Latrobe, the Supreme Leader of Rolling Rock decided to increase the personal tax rate to fund the defense force. 8) How may this affect the loanable funds market? Explain by describing the change in the demand for, or the supply of, loanable funds. 9) Because of the change decreed by President Thug and your answer to question 8, what is likely to happen to the interest rate and the quantity of funds in the loanable funds market? 10) How will each of these Rolling Rockers feel about President Thug’s decision? (A) Investor Confidence (B) The President of Rolling Rock National Bankarrow_forward
- Congress passed the CARES Act to provide an economic safety net during the Covid-19 pandemic shutdown. The CARES Act included stimulus checks that were sent to some households. Households with individuals making up to $75,000 received a $1,200 check and households with married couples making up to $150,000 received a $2,400 check. Think about how the savings rate varies with household income and the utility of savings versus spending when answering the questions below. Does the particular income limit imposed make sense? Should it be higher, lower, or should there be no limit. Provide an explanation for your answer.arrow_forwardSuppose there is an increase in the interest rate in the financial markets. What effect will this have on income? Use a diagram to support your answer.arrow_forwardSuppose people can consume the income they earn or save and invest it at rate ?. If we tax wealth at a rate greater than ?, how are people likely to adjust their rate of savings?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning