Derive the market demand for loanable funds

Assignment Help Finance Basics
Reference no: EM13263643

The current market rate of interest is 8 percent. At that rate of interest, businesses borrow $500 billion per year for investment and consumers borrow $100 billion per year to finance purchases. The government is currently borrowing $100 billion per year to cover its budget deficit.

A) Derive the market demand for loanable funds, and show how investors and consumers will be affected if the budget deficit increases to $200 billion per year.
B) Show the impact on the market rate of interest, assuming that taxpayers do not anticipate any future tax increases.
C) How would your conclusion differ if taxpayers fully anticipate future tax increases?
D) Suppose 90 percent of the net federal debt was acquired by foreign investors. How would this affect the burden of the debt for U.S. citizens?

Reference no: EM13263643

Questions Cloud

How much do you need to invest at the end of each year : How much do you need to invest at the end of each year (while working) to allow this to happen?
How much do you need to invest today : How much do you need to invest today (once) to have $89,000 at the end of 19 years if you can earn 3.5% annually?
What is the wavelength of this pitch in air : A guitar string is tuned to an E4, The concert pitch standard A440 has a frequency of 440 Hz. What is the wavelength of this pitch in air
Identify a data set that can be used for your process : Next, identify a data set that can be used for your process. The data set must consist of at least 25 data points. If your article does not contain a data set, then you may use the data set from Unit 1. Include the data set in your summary.
Derive the market demand for loanable funds : The current market rate of interest is 8 percent. At that rate of interest, businesses borrow $500 billion per year for investment and consumers borrow $100 billion per year to finance purchases. The government is currently borrowing $100 billion ..
What is the antenna gain-radiated power and eirp : A transmitting antenna has a radiation resistance of 72 ohms, an effective resistance of 8 ohms, a directive gain of 20, and an input power of 100 watts. What is the antenna gain, radiated power, and EIRP
Find the coefficient of staticfriction between wall and pole : A sign for the local cheese shop is hung by two strings of length 0.25 meters at either end from a 4 meter long pole with a mass of 200 kg. what is the coefficient of static friction between the wall and the pole
Find and plot the voltage that appears across the resistor : A perfect conductor joins two ends of a 100 ohm resistor and closed loop is in the region of uniform magnetic flux density B = 10*e^(-t/10) T. Neglecting the self-inductance of the loop, find and plot the voltage V(t)
What size would a sail have to be to accelerate a spaceship : Scientists have proposed using the radiation pressure of sunlight for travel to other planets in the Solar System. If the intensity of the electromagnetic radiation produced by the Sun is about 1.4 kW/m2 near the Earth

Reviews

Write a Review

Finance Basics Questions & Answers

  Compute the expected rate of return

An investment costs $1,000 and is expected to produce cash flows of $75 at the end of each of the next five years, and additional lump sum payment of $1,000.

  Determining money and interest rate

What major economic indicators would you examine if you were planning to make the large purchase and required a loan. Buying a new car, business equipment or house?

  Calculate value of duration

Compute the value of duration for a 4-year, $1,000 par value U.S. Government bond purchased today at a yield to maturity of 15%. The bond coupon rate is 12 percent and it pays interest once a year at year end.

  Settling labor disputes and product liability suits

Bankruptcy plays no role in settling labor disputes and product liability suits. Such issues are outside the bounds of bankruptcy law.

  Determine sales in division

Devlin Corporation has two divisions, C and D. The overall corporation contribution margin ration is 30% with sales in the two divisions totaling $500,000.

  Prepare a cash budget

Make a cash budget for XYZ Company for the first three months of 2004 based on the following data:

  Define aggressive financing strategy

What is an aggressive financing strategy? What are components of aggressive finance strategies?

  Unbiased expectations hypothesis

The Wall Street Journal reports that the rate on two year Treasury securities is 2.10% and the rate on four year Treasury securities is 3.05%.

  Computation of yield to maturity at a current market

Computation of yield to maturity at a current market price of bond and Would you pay $829 for each bond if you thought that a "fair" market interest rate for such bonds was 12%- that is if r=12%

  Compute the net proceeds

Northern Airlines is about to go public. It currently has after-tax receiving’s of $6,000,000 and 4,000,000 shares are owned by the present stockholders.

  Calculation of additional funds needed

Calculation of additional funds needed and so its assets must grow in proportion to projected sales

  What is the value of an fra that enables the holder to earn

Q1) The 12-month, 15-month, 18-month zero rates are 7.4%, 7.5%, 7.6% with continuous compounding. What is the value of an FRA that enables the holder to earn 8.6% (with semiannual compounding) for a 6-month period starting in one year on a principal ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd