Reference no: EM131022228
Week 5
1. We discussed in class the behavior of interest rates over time in response to an expansion of the money supply, finding that there were three possible interest rate profiles that could be observed following such a monetary expansion. Repeat this analysis for the case of a decrease in the money supply (a monetary contraction).
2. (a) List the four factors in the economic environment that can lead to a substantial deterioration of firms' balance sheets that can worsen adverse selection and moral hazard problems in financial markets, eventually leading to a financial crisis. List the four factors that have triggered most financial crises in the United States.
3. (Mishkin, ch. 8, #4) How do standard accounting principles required by the government help financial markets work more efficiently?
4. (Mishkin, ch. 8, #11) How does the free-rider problem aggravate adverse selection and moral hazard problems in financial markets?
5. Consider a fictional economy in which there is one firm and one household (on a deserted island, say). We are at the end of a year in which the firm had total revenue of $10,000, wage expenses of $7,000 (paid to the household), and $1,000 in other expenses. The firm paid the household $1,000 in dividends at the end of the year. The firm does not have any net worth (equity) carried over from previous years of operation. Over this same time period the household consumed goods and services worth $6,000 and saved the rest of the funds received from the firm. If the loanable funds market is in equilibrium in this economy, how much investment expenditure must the firm be planning to make?
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The impact on operating income for eliminating
: The impact on operating income for eliminating this business segment would be:$54,900 decrease$135,100 decrease$52,900 decrease$190,000 increase$190,000 decrease
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Why might this risk reduce the value of pension funds
: In an opinion column in the Wall Street Journal, Martin Feldstein of Harvard University argued with respect to quantitative easing that, "low interest rates are generating excessive risk-taking by banks and other financial investors." He also warn..
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Discuss the big five personality test
: Discuss the strengths and limitations of dispositional and evolutionary or biological personality theories as they apply to behavior.
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What is the molar mass
: What is the molar mass (g/mol) of unknown carbonate number in the titration of Hcl & Naoh Average titre of Naoh (1.023M) is 22.5 ml.
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How much investment expenditure must the firm be planning
: How do standard accounting principles required by the government help financial markets work more efficiently - how much investment expenditure must the firm be planning to make?
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Zinc carbonate, znco3, a slightly soluble substance
: 5. Zinc carbonate, ZnCO3, a slightly soluble substance, is most soluble in which of the following solvents? a) water b) 0.1M ZnCl2 (aq)
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Markson company had the following results of operations
: A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $13.25 per unit.
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What is the concentration in millequivant
: 0.575g of Mg 2 in enough water enough water to make 1830 ml of solution. What is the concentration in millequivant/ liter
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Draw the graphs depicting the supply and demand for bonds
: Draw the graphs depicting the supply and demand for bonds and the supply and demand for loanable funds. Using both of these graphs, show what happens to prices and quantities in the bond and loanable funds markets.
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