EP ECONOMICS,AP EDITION-CONNECT ACCESS
EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 35, Problem 8DQ
To determine

Role of time preference in determining expected rate of return.

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For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain! a).  a bond of the U.S. government or a bond of an East European government b).  a bond that repays the principal in year 2015 or a bond that repays the principal in year 2040 c).  a bond from Coca-Cola or a bond from a software company you run in your garage d).  a bond issued by the federal government or a bond issued by New York State
For 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,…
In the summer of 2010, Congress passed a far-reaching financial reform bill to attempt to prevent another financial crisis like the one that happened in 2008-2009. We will consider two scenarios related to this bill. 18. In the first scenario, suppose that by requiring firms to comply with strict regulations, the bill increases the cost of investment. Draw a graph showing the consequences of this scenario on the market for loanable funds. What is the result? 19. Now consider the second scenario: Suppose that by requiring firms to comply with strict regulations, the bill increases confidence that savers have with the financial system, making them more likely to save their money there. Draw a graph showing the consequences of this scenario on the market for loanable funds. In this scenario, which curve shifts, and what are the results?
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