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Suppose a credit market with a good borrowers and 1-a bad borrowers. The good borrowers are all identical, and always repay their loans. Bad borrowers never repay their loans. Banks issue deposits that pay a real interest rate r1, and make loans to borrowers. Banks cannot tell the difference between a good borrower and a bad one. Each borrower has collateral, which is an asset that is worth A units of future consumption goods in the future period.
(a) Determine the interest rate on loans made by banks.
(b) How will the interest rate change if each borrower has more collateral?
(c) Explain your results, and discuss.
Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in spending on goods and services by households. Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in spending on goods a..
Take a look at the last word in this chapter. What explains why millions of economic resources tend to get arranged logically and productively rather than haphazardly and unproductively.What is the invisible hand and what is the significance?
Show graphically and calculate the terms of trade gain, the efficiency loss, and the total effect on welfare of the tariff.
Draw the market demand curve faced by this monopolist.
A Chinese official is considering construction of a gondola lift system that transports visitors from the tops of the mountain peaks to the valley at one of the National Forrest Parks in China. The lift system is expected to last for 20 years.
Natural resources and international trade? What is the status of the H-O theory today?
If your nominal income rose by 5.3 percent and the price level rose by 3.8 percent in some year, by what percentage would your real income increase and what would be the change if the nominal income rose by 2.8 percent
A group of venture investors is considering putting money into Lemma Books, which wants to produce a new reader for electronic books. The variable cost per unit is estimated at $250, the sales price would be set at twice the VC/unit, or $500
Each firm in a competitive market has a cost function of \(C=q+q^{2}+q^{3}\) The market demand function is Q = 24 - p. Determine the long run equilibrium price, quantity per firm, market quantity, and number of firms.
Helen purchases a new Ford Focus. She negotiates a price of $18400, trades in her 1993 Contour for $1700, puts down an additional $1000, and borrows the remainder for 3 years at 6% interest. How large will her monthly payments be
The spring unwinds as the piston moves down, and the pressure and volume drop to 0.7 MPa and 0.5 m3 at the end of the process.
The "Big-Deal" Company has purchased new furniture for their offices at a retail price of $100,000. An additional $20,000 has been charged for insurance, shipping, and handling. The company expects to use the furniture for 10 years (useful life = ..
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