(there are 5 questions)

Post by **answerhappygod** » Fri Jul 01, 2022 8:14 am

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1. Financial institutions in the U.S. economy Suppose Dmitri would like to use $9,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab-a practice known as issued by NanoSpeck would give Dmitri will be paid first. Suppose instead Dmitri decides to buy 100 shares of NanoSpeck stock. finance. Buying a bond the firm. In the event that NanoSpeck runs into financial difficulty. Which of the following statements are correct? Check all that apply. NanoSpeck earns revenue when Dmitri purchases 100 shares, even if he purchases them from an existing shareholder. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase NanoSpeck stock. Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Dmitri's shares to decline. Alternatively, Dmitri could make a financial investment by purchasing bonds issued by the government of Japan. Assuming that everything else is equal, a bond issued by a government that is engaged in a civil war most likely pays a than a bond issued by the government of Japan. Interest rate

pany. a practice known as In the event that Na debt equity finance. Buying a bor runs into financial difficu A ases them from an existing shareholder.

cial investment is to purchase stock or bonds from a private technology firm, is selling bonds to raise money for a new la d give Dmitri the fi cides to buy 1 an IOU, or promise to pay, from a claim to partial ownership in tements are correct? Check all that apply. s revenue when Dmitri purchases 100 shares, even if he pu

Suppose NanoSpeck, a biotechnology issued by NanoSpeck would give Dmitri Dmitri and the other bondholders will E y 100 share the stockholders ment of the following statements are correct? C NanoSpeck earns revenue when Dmitri The Dow Jones Industrial Average is an

n from an existing shareholder. hase NanoSpeck stock. use the value of Dmitri's shares to decline. higher ment of Japan. war most likely pays a lower terest rate

2. Saving and investment in the national income accounts The following table contains data for a hypothetical closed economy that uses the dollar as its currency. Suppose GDP in this country is $800 million. Enter the amount for government purchases. Value (Millions of dollars) National Income Account Government Purchases (G) Taxes minus Transfer Payments (7) Consumption (C) Investment (1) 260 300 300 Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table. National Saving (S)

Re howing able. Faving (S) the following tabl table. A G-T Y-T-G Y-C Y-C-G million national inco

table. Saving (S) = e the following tab I table. Saving I million ing national income acco million

Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. Private Saving- Public Saving- million million Based on your calculations, the government is running a budget

te Saving lic Saving C-T Y-C-T Y-T-I T-G million million sed on your calculations, the government is run

ete the following table by using natio cial table. Y-T-I e Saving Saving T-G C-T Y-C-T million million

= budget deficit surplus t

3. The meaning of saving and investment Classify each of the following based on the macroeconomic definitions of saving and investment. Saving Investment Kevin buys a government bond. Maria purchases new ovens for her cupcake-baking business. Rajiv purchases a new condominium in Chicago. Simone purchases stock in Goohoo, an information technology company. OOO O OOO O

4. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. INTEREST RATE (Percent) 10 Р # I Supply Demand

INTEREST RATE (Percent) 10 B 8 6 5 4 3 2 0 Supply Demand 100 200 300 400 500 600 700 800 900 1000 LOANABLE FUNDS (Billions of dollars)

is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is demanded, resulting in a of loanable funds. This would encourage lenders to the quantity of loanable funds supplied and the equilibrium interest rate of than the quantity of loans the interest rates they charge, thereby the quantity of loanable funds demanded, moving the market toward

5. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) EST RATE (Percent) Supply Demand Demand 0 Supply ?

INTEREST RATE (Percent) LOANABLE FUNDS (Billions of dollars) Supply Demand O Demand O Supply

Scenario 1: Individual Retirement Accounts (IRAS) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Now suppose there is an increase in the maximum contribution, from $5,000 to $8,000 per year. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending to Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government repeals a previously existing investment tax credit. Shift the appropriate curve on the graph to reflect this change. The repeal of the previously existing tax credit causes the interest rate to Scenario 3: Initially, the government's budget is balanced; then the government responds to the conclusion of a war by significantly reducing defense spending without changing taxes. This change in spending causes the government to run a budget Shift the appropriate curve on the graph to reflect this change and the level of saving to This causes the interest rate to which the level of investment spending. national saving.