Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 26, Problem 7PA
Subpart (a):
To determine
The Investment and the loanable fund market of the economy.
Subpart (b):
To determine
The Investment and the loanable fund market of the economy.
Subpart (c):
To determine
The Investment and the loanable fund market of the economy.
Subpart (d):
To determine
The Investment and the loanable fund market of the economy.
Subpart (e):
To determine
The Investment and the loanable fund market of the economy.
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Students have asked these similar questions
Three students 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
a. If borrowing and lending are prohibited, each student uses only personal savings to finance his or her own investment project, how much will each student have a year later when the project pays its return?
b. Now suppose their 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?
c. Among these three students, what would be the number of loanable funds supplied and quantity demanded at an interest rate of 7 percent? At 10 percent?
d.At what interest rate would the loanable funds market among these three students be in equilibrium? At this interest rate,…
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?
Three students 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:
Student
Return
(Percent)
Carlos
4
Felix
7
Janet
15
Assume borrowing and lending is prohibited, so each student uses only personal saving to finance his or her own investment project.
Complete the following table with how much each student will have a year later when the project pays its return.
Student
Money a Year Later
(Dollars)
Carlos
Felix
Janet
Now suppose their school opens up a market for loanable funds in which students can borrow and lend among themselves at an interest rate rr.
A student would choose to be a lender in this market if his or her expected rate of return is than rr.
Suppose the interest rate is 6 percent.
Among these three students, the quantity of loanable funds supplied would be
,…
Chapter 26 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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Similar questions
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