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1) Draw a supply/demand diagram to model the US stock market (use the value of a stock price index such as the S&P 500 to represent the overall level of stock prices.) Show the effect on stock prices of a decline in interest rates in the economy. (hint: from the view point of those with accumulated savings to invest, interest bearing financial assets such as money market funds and bank certificates of deposit are substitutes for stock market mutual funds....also, from the viewpoint of future corporate sales, lower interest rates mean that customers can more cheaply finance the purchase of goods)
2) The US treasury isn't the only issuer of bonds. Corporations also issue bonds that have future payment structures like U.S. Treasuries. Of course, unlike the federal government, corporations can go bankrupt, leaving their bondholders unable to collect all of their scheduled payments. Because of this risk of default, corporate bonds must have a higher yield in equilibrium than similarly structured Treasury bonds. Under what economy-wide economic conditions, if any, might you expect to see corporate bond yields rise while Treasury Bond yields fell?
3. In the same context of Q6 above, briefly explain why the prices of Short Term US treasury securities are still high enough to keep the interest low enough despite the fact that the US Bond rating has been downgraded from AAA status to AA+ by S&P in July, 2012.
Ceteris paribus, coffee Brand X and coffee Brand A are substitutes in consumption. The price of coffee Brand X falls. a. What happens to the demand for coffee Brand A b. What happens to the demand for coffee Brand X
The value of a home depends on how attractive other homes and yards in the area are. How do local zoning ordinances try to promote land uses that generate external benefits for neighbors?
As a government needs to increase tax income, it will often increase the sales tax on gasoline.
Later Henry ford invented the assembly line for manufacturing automobiles, other automobile firms copied his invention.
Quinton needs a new refrigerator. He has two choices a basic one, or a more efficient one from Energy Star. He earns 4% compounded annually on his investments, he wants to consider a 10-year planning horizon, and he will use present worth analysis to..
Income statements provide a snapshot of a business' profit and loss. Examine the financial situation on the monthly income statement for Aline's Cafe´ in your textbook and discuss how this restaurant is doing financially.
Suppose that the natural rate of unemployment in a particular year is 5 percent and the actual rate of unemployment is 9 percent. Use Okun's law to determine the size of the GDP gap in percentage-point terms. If the potential GDP is $500 billion i..
Suppose two high tech companies, X and Y, are the only producers of a new product that is used my numerous computer manufacturers.
Two oligopoly company are in the process of estimating their marketing strategies. Firm 1 can generate estimated profits of $10 million from strategy A
To repay a $1000 loan, a man paid $90 at the end of each month for fifteen months. What was the (annual) nominal interest rate? Assume monthly compounding.
Elucidate how the firm can use transfer costs to lower the corporate tax burden, which is 34% in the U.S. and 30% in the foreign location.
Each demand curve must eventually hit the quantity axis because with limited incomes there is always a price so high that there is no demand for the good.
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