Explain carefully why will homer be disappointed

Assignment Help Macroeconomics

Reference no: EM13244758

The Springfield Times reports that the nominal interest rate inthe neighboring economy of Shelbyville is 12% per year and 8% peryear in Springfield. Suppose that the real interest rates areequalized in the two economies and that purchasing power parityholds.

(a) What can you infer about expected inflation in Springfield andShelbyville?

(b) What can you infer about the expected change in the exchangerate between the Shelbyville dollar and the Springfield dollar?

(c) After reading the newspaper Homer Simpson embarks on thefollowing get-rich-quick scheme: he borrows money from aSpringfield bank at 8% and deposits it in a Shelbyville bank at12%, expecting to make a 4% profit. Explain carefully why will Homer be disappointed?

Reference no: EM13244758

Questions Cloud

Internal rate of return method to evaluate capital expend : Plummer Chemicals employs the internal rate of return method to evaluate capital expenditure proposals. Plummer adjusts its acceptable rate of return to accommodate varying degrees of risk.

What were the equilibrium levels of the real interest rate : Siberia can be considered as a closed economy. Recentdata about its population movements indicate that the region suffered from asevere loss in its working age population from 1995 to 2005.

Explain what is the volume of nh3 : What is the volume of NH3 produced in the following reaction when 3.0 L of N2 reacts with 4.0 L of H2? N2 (g) + 3H2 (g) -> 2NH3(g)

Explain how many kilometers will radio messages : Radio waves travel at the speed of light which is 3x10^8 m/s. how many kilometers will radio messages to outer space travel in one year

Explain carefully why will homer be disappointed : After reading the newspaper Homer Simpson embarks on thefollowing get-rich-quick scheme: he borrows money from aSpringfield bank at 8% and deposits it in a Shelbyville bank at12%, expecting to make a 4% profit.

New information about the ancient world : Find an article that provides new information about the ancient world (pre-1500) which was published within the last five years.

Discuss the spread of christianity and islam : Discuss the spread of Christianity and Islam. What reasons might there be for the timing, rapidity, and direction of Muslim territorial expansion? What were the causes of the decline of the caliphate?

What is the cars speed at the top : The normal force equals the magnitude of the gravitational force as a roller coaster car crosses the top of a 59-m-diameter, What is the car's speed at the top

Calculate the dead weight loss from monopoly : (a) Find the price and quantity that maximizes the company's profit. (b) Find the price and quantity that would maximize socialwelfare/total surplus. (c) Calculate the dead weight loss from monopoly.

User Account

All Pages