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Problem
Consider a project that needs a fixed investment I = $100 and yields a gross return y > I with certainty. A risk-neutral borrower wants to invest in this project, but she only has private wealth w = $58 that can be used for investment. She has the option to go to a risk neutral and competitive bank in order to borrow the rest of the money that she Why Intervene in Credit Markets?
Needs to carry out her investment project, (I - w). Once the project has yielded a positive return, the borrower can either run away with the money or repay her debt. The lender can observe the result of this particular investor's project with probability s = 0.7. If the borrower refuses to repay the money and the bank observes that the project has been successful, the bank can seize w. Explain whether you would expect the bank to be repaid in this ex post moral hazard scenario and why. (For the sake of simplicity, you can assume that the cost of raising capital for the bank is zero per each dollar lent.)
Do you concur with the dispute settlement decisions in the World Trade Organization in this case? The panel report? The appellate decision? The arbitration ruling?
Presume that banks desire to hold no excess reserves, the reserve requirement is 5% and a bank receives a new deposit of $1,000.
A 529-state-approved individual retirement account (IRA) permits parents to invest tax-free dollars into their children’s college education fund (this money may only be used for educational expenses).
Do you believe that the unemployment rate does not fluctuate around a fixed natural rate? Or does it instead fluctuate around a moving target which can be influenced with policy actions of the fed?
A monopolist produces a good x and pollution as a by-product. Determine the socially optimal gross and net emission level EG** and E**
Go to http://sffed-education.org/chairman. Use the Learn More button and review the tight and easy tools of the Fed as well as the use of each. Briefly examine the Economic Dictionary and the Policy in Depth features.
Several states in the United States, including Wisconsin, Vermont, and Minnesota, also have such legislation. Many states require certain persons to report speci?c kinds of crimes, most often child abuse. Find and compare two state statutes.
Discuss the impact of such plants and compare their economies of scale with small businesses in your own hometown.
Assume the following market demand and supply functions P + 25 Qd = 1000 P2 + 5 Qs = 100 P0.4- Graph the excess supply function.
What is the marginal rate of transformation (MRT)? Explain why the MRT of one good for another is equal to the ratio of the marginal costs of producing the two goods.
Assume a market demand curve of 240Q - 10p = 0 , if marginal costs are zero what is the cournot equilibrium price and output?
What three factors determine whether two economies with separate fiscal and monetary authorities should form a currency union? Give an illustration of each factor using NAFTA economies.
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