Suppose you borrow $1,000 from a bank at a fixed rate of interest (5%) for one year to finance your college education. Explain the redistribution of income that occurs if the rate of inflation that year is 7%. Was this loan advantageous to you or the bank?
Q: In "The Incredible Bouncing Ruble" Sergei Guriev argues that the Russian Ruble appreciated in the…
A: Conflicts, like wars and civil disturbances, generally exert a significant adverse influence on…
Q: next year to be 2 percent and the nominal interest rate is percent. Suppose that corporations expect…
A: The issue you raised has to do with macroeconomics, more especially with the loanable funds market…
Q: Meyer (1995) lists nine threats to internal validity of natural experiments. Describe three.
A: Natural experiments are research investigations that take advantage of spontaneous deviations from…
Q: In your opinion, what strategies or measures could be implemented to reduce income tax cheating and…
A: Income tax is a tax forced by a government on the income of individuals and businesses inside its…
Q: QUESTION 1 If a factor of production has a fixed total supply, then payments to that factor…
A: The issue you raised has to do with finance and economics' "Time Value of Money" concept. It entails…
Q: 3. Consider the individual's utility function: U = U(C, L) = L Ch (a) Compute the Marshallian labour…
A: Marshallian labor supply refers to the relationship between the wage rate and the amount of labor…
Q: Refer to Figure 6-25. Suppose the same supply and demand curves apply, and a tax of the same amount…
A: "Burden on buyers" refers to the increased cost or price paid by buyers, and the "burden on sellers"…
Q: When consumers are maximizing their utility, they have to consider choosing the optimal combination…
A: According to the utility maximization model, the rational consumer seeks to maximize the utility…
Q: 4. Consider the following endogenous growth model: a representative household's life-time utility…
A: Paul Romer in 1986 modified the AK model by creating a Ramsey version. He gave the intertemporal…
Q: Competitive firms have all of the following characteristics except: O All of these are…
A: A market generates high competitiveness when the sellers wanted to effectively maximize its overall…
Q: Equipment maintenance costs for manufacturing explosion-proof pressure switches are projected to be…
A: Present worthPresent worth is a method utilized widely in finance especially in decisions involving…
Q: in the figure to the right, let D be the demand for a monopolistically competitive firm's output.…
A: Market structures hold vital importance in the field of economics. They shape market dynamics,…
Q: 4. Given this diagram; what is the equilibrium level of income? 5. Given this diagram; what is the…
A: Aggregate expenditure is the sum total of expenditures. Aggregate expenditure is the sum of…
Q: In an open market sale A) the Central Bank purchases reserves from the banks in exchange for…
A: It can be defined as a concept that shows how much currency of one nation is valuable in terms of…
Q: using the diagram below defent thr point that a free market will always move from disequilibrium to…
A: Market equilibrium refers to a condition at which the quantity demanded of a goods or services…
Q: among the following options which one is not included in money market security? a treasury bills b…
A: Every company or an individual having high quantity of liquid cash in their hand often prefer to…
Q: (e) ₁ Suppose the firm operates in the short run: Capital is fixed at 24. Solve the firm's cost…
A: Production function: Here q denotes the level of output produced using labor L and capital K. In the…
Q: Using the following table, for each price level, calculate the optimal quantity of units for the…
A: Profits, in an economic and business context, refer to the financial gains or earnings that a…
Q: Suppose that an economy produces only 2 goods, beer and pizza. Show a typical production…
A: The cost that a person has to bear to obtain a particular is termed an opportunity cost. It means…
Q: the earnings on the assest funds of a permanent fund are to be used to support the city's library…
A: Looks like that you have asked 2 seperate question. Since you have a posted question with multiple…
Q: d) Using the above information, identify the equilibrium group of hot tub users. Then identify the…
A: 10 friends have 2 weekend activities to do mentioned below:ParkHot TubBenefit received by each…
Q: The YouTube video "Why Capitalism Works" seems to provide a compelling case for why capitalism is…
A: Capitalism is an economic and social system characterized by private ownership of the means of…
Q: $11. Anne and Bruce would like to rent a movie, but they can't decide what kind of movie to get:…
A: The Nash equilibrium is a form of game that involves two players. The equilibrium is reached at a…
Q: True or false. When industry profits decline and firms exit, the equilibrium price increases. Hence,…
A: A negative externality occurs when the production or consumption of a good or a service has a…
Q: In the figure to the right, suppose that We is a wage rate of $28 per hour and W₁ is a wage rate of…
A: A wage rate, often simply referred to as "wage," is the amount of money paid to an employee for…
Q: draw a circular flow diagram where income is $200m consumption is $120m, tax/government spending is…
A: Keynesianism has grown in the postwar century in terms of its ability to alleviate economic…
Q: Prices That Rose Health insurance Gasoline Lettuce Cigarettes Hot dogs College tuition Bananas (%)…
A: The gradual rise in the average price of goods and services over time in an economy is referred to…
Q: Fresh Veggie is one of many small farms in Florida operating in a perfectly competitive market. Farm…
A: The marginal productivity will be calculated as an extra amount produced when one extra unit of a…
Q: AGGREGATE OUTPUT/INCOME 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 CONSUMPTION 2,100 2,500…
A: Aggregate Output/Income: It's the total value of all goods and services produced in an economy,…
Q: A consumer has a daily income of $240 to buy two goods (X, Y). The price of X is $8 and the price of…
A: The utility function represents the relationship between utility and commodities consumed.
Q: How would you construct a strategic plan for a company to raise finantial capital?
A: The objective of this question is to understand the process of creating a strategic plan for a…
Q: The last five questions refer to the following diagram, involving the marginal cost (MC) and average…
A: A perfectly competitive firm produces at P = MC to maximize profit. i.e., At P = MC, firm maximizes…
Q: Both Bob and Laura can work 6 hours per day in either market work for a wage or in home production.…
A: An economic concept known as comparative advantage describes a situation in which one person,…
Q: Felix chooses between clothing, 9₁, and food, 9₂. His initial income is $4,000 a month, p₁ = 400,…
A: Consumer preference:It is related to the preference of consumers over a different bundle of goods.…
Q: 5. Costs in the short run versus in the long run Scooter's Scooters is a large American manufacturer…
A: Economies of scale is when the increase in output decreases the average total cost Diseconomies of…
Q: Foster, Inc. makes a new type of rubber gloves for assembly-line workers and will sell them to…
A: Cost Price of a pair of gloves = $4.15Selling Price of a pair of gloves = $6.25Increase in…
Q: Suppose p is very close to 0 and V is very large. Assume Cp = Cp = C. Is the plaintiff more likely…
A: Contigency fee arrangements, where lawyers are compensated based on a percentage of the damages…
Q: 1. Suppose steel is produced by a monopoly with a typical cost structure. a. Graphically show the…
A: The significance of the steel sector in economic growth is rooted in its role as a cornerstone for…
Q: 7.7. Sales tax. Consider an industry with market demand. Q = 550-20p and market supply Q = 100+10 p.…
A: Market equilibrium is a state where the quantity of a good or service demanded by consumers equals…
Q: Wage Rate 0 D₁ Quantity of Labor Refer to the above graph. What will shift An increase in the price…
A: Labor, with respect to economics and employment, basically implies the physical and mental effort…
Q: 2. Possible causes of the shift in AS from ASo to AS1 in Figure D, include: a) an embargo on…
A: ***Since the student has posted multiple questions, the expert is required to solve only the first…
Q: (1) Laura has more Apples than Larry, then Larry prefers A to B - True or False? (ii) How does "B"…
A: Edgeworth box represents the total quantity of Apples on the horizontal axis and total quantity of…
Q: (a) State the maximization problem solved by each type of agent and derive the first- order and…
A: Equilibrium is an economic concept, where two market forces, i.e. demand and supply equate each…
Q: 1. Refer to the data above to answer this question. What is the equation for the saving function? a)…
A: Aggregate expenditure is the sum of Consumption , Investment ,government spending, and net export…
Q: Consider a panel data set and the following regression model. What do subscripts i and t refer to?…
A: Regression model:The regression model is the model that shows the relationship between two…
Q: All of the following statements are generally true EXCEPT: OA. The rate of change in nominal wages…
A: Unemployment is a situation in which the individual is willing to work at the market wage rate but…
Q: i. Explain the importance of studying time value of money.
A: TVM states that the value of money changes over time due to factors such as interest rates,…
Q: 3. Profit maximization using total cost and total revenue curves Suppose Sam runs a small business…
A: This can be defined as a concept that shows the cost incurred in the production process of a…
Q: Create a useful plan for how a firm may raise finantial capital.
A: The objective of this question is to create a plan for a firm to raise financial capital. Financial…
Q: The table shows the market for chocolate bars Quantity demanded Quantity supplied (thousands per…
A: Equilibrium Price: The equilibrium price is the price at which the quantity demanded by buyers…
Suppose you borrow $1,000 from a bank at a fixed rate of interest (5%) for one year to finance your college education. Explain the redistribution of income that occurs if the rate of inflation that year is 7%. Was this loan advantageous to you or the bank?
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
- Suppose you take out a loan for school this year for $4500. The bank expects that the rate of inflation for next year will equal 2%. You and the bank agree that in one year's time, you will pay back the full amount at an interest rate of 6%. Next year though, there is a sudden rise in inflation, causing inflation to equals 7%. How much will you pay back in one year?How might a rapid rise in inflation harm you? How might a rapid rise in inflation help you? In answering this question consider your role as both a consumer, worker, and borrower. Consider the likely effect on your real wages, and any interest you receive as a saver. Would it be advantageous to borrow money if you expected inflation to rise? Does it make economic sense to open a savings account at a bank given the latest increase in the CPI.Assume you just deposited $1,000 into a bank account. The current real interest rate is 2%, and inflation is expected to be 6% over the next year. What nominal rate would you require from the bank over the next year? How much money will you have at the end of one year? If you are saving to buy a fancy bicycle that currently sells for $1,050, will you have enough money to buy it?
- Assume that Sarah agrees to lend $100 to Sam for one year. Sam agrees to pay Sarah $117 at the end of the year. If inflation over that one year is 8%, what real rate of interest does Sarah earn on her $100?You open a savings account with a 0.5% per year nominal interest rate, and the economy experiences 3% per year inflation. What is your nominal and real annual interest rate on the account? What will happen to the purchasing power of money you place in the account over time?"The rate of return to bonds should be near equal to the equilibrium interest rate in the credit market." True or False?
- The effective interest rate on a mortgage with monthly payments is 9.38%. What is the monthly interest rate on the mortgage? What is the nominal interest rate?Mary will earn $42,544 this year and $21,839 next year. The real interest rate is 15% between this year and next year; she can borrow or lend at this rate. She has no wealth at the start of this year and plans to finish next year having consumed everything she possibly can. She would like to consume the same amount this year as next year. The inflation rate is 0%. How much should Mary save?Using practical examples, explain the difference between transfer payments and government purchases.
- In which situation would you rather be a borrower? the nominal interest rate is 10%, the inflation rate is 9% the nominal interest rate is 8%, the inflation rate is 6% the nominal interest rate i 6%, the inflation rate is 3% the nominal interest rate is 4%, the inflation rate is 0%EXERCISE 10.9 LIMITS ON LENDING Many countries have policies that limit how much interest a moneylender can charge on a loan. Do you think these limits are a good idea? Who benefits from the laws and who loses? What are likely to be the long-term effects of such laws? Tips: For Question 2, you may think about how a low interest rate would affect the poor and those who owe huge debts. For Question 3, you may think about how it would affect the profitability of the banking sector and the supply of lending (will lenders be encouraged to lend more?), and what implications it may have for "credit rationing" (being credit constrained).A loan has an interest rate of 8%, and the inflation rate is 2.4%. What is the loan’s real interest rate adjusted for inflation?