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Suppose Bob considers borrowing $100 from Sheila at a 10 percent interest rate. They both think that a 4 percent real interest rate would be fair.
a. What was the inflation rate they both expected?
b. If the inflation rate turned out to be 8 percent, how much was the real interest rate? Who gained and who lost from this transaction, and how much because of unexpected inflation?
c. If there was a capital gain tax of 30 percent, what is the after-tax real interest rate, with the inflation rate of 8 percent?
Suppose it had begun an expansionary policy early in 1981. What does the text's analysis of the inflation unemployment cycle suggest about how the macroeconomic history of the 1980s might have been changed.
Why do proponents of active policy recommend government intervention to close an expansionary gap. Some economists argue that only unanticipated increases in the money.
Suppose you work in a financial institution, how you would advise your clients.
Assume that during the last month of the tenth year of ownership, the property in Problem 2 is sold for 1,500,000. Assume also that the seller incurs transaction costs equalling 6 % of the sales price.
Caught up in broad social and economic disaster that swept the Mediterranean basin during the twelfth century BCE, what seems to have happened to the civilization of people.
This would be ideal because he would have the same number of pretzels as he would soda leaving no money left to spend.
In your opinion should our government impose price floors and/or price ceilings in our economy.
Assume an endogenous growth model with labour augmenting technology.
A flat tax plan allows individuals to deduct a standard allowance of $10,000 from their wages. Assume that the flat tax rate is 12%. Calculate the amount of income tax and the average tax rate if you were earning.
Two firms are located on the line and sell identical products. Consumers obtain K utility from consuming a product; assume that K is large enough that all consumers purchase from at least one of the firms despite the costs of transportation.
A Fenway park, home of the Boston Red Sox, seating is limited to 39.000. Hence, the number of tickets issued is fixed at that figure. Seeing a golden opportunity to raise revenue.
If most businesses in an industry are earning a 13 percent rate of return on their assets, but your firm is earning 23 percent what is your rate of economic profit
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