How might the policy be exasperating the recession

Assignment Help Microeconomics
Reference no: EM131725639

Assignment

1) As of the Spring of 2011 interest rates are near 0% and have been for sometime.

a) According to theory, if you lower interest rates, business investments and consumer purchases of large durable goods are supposed to increase. In return, this is to help pull us out of a recession. However, this policy of extraordinarily low interest rates has not stimulated investment demand. Why do you think this is the case (hint - think Keynes and animal spirits).

b) How might this policy be exasperating the recession (hint - think of savers and the wealth effect)

c) A colleague of mine said that ‘monetary policy does nothing but create bubbles in the economy'. Do you agree with this statement? How did the low interest rate environment of the ‘post dot com' bubble day help to contribute to the housing bubble? Do you for see another market bubble in the economy (ie, in the housing market or stock market or in ‘gold stocks' - explain relating low interest rates to a new bubble).

If you were a merchant and wanted to increase total revenue by changing the price of your merchandise, why is it important for you to know about the elasticity of demand for your merchandise? Relate your answer to both possible increases and decreases in price.

Reference no: EM131725639

Questions Cloud

What should the stock be currently selling for : If the market rate of return on this stock is 16%, what should the stock be currently selling for?
What are the initial cash flows in year 0 : What are the Initial Cash Flows in Year 0? What are the Operating Cash Flows in Year 2?
Calculate sales growth and operating expense growth : Using the consolidated statements of operations, analyze the profitability of Intel by preparing a common-size income statement and by calculating any other.
Willing to pay for investment : You are considering the purchase of an investment that would pay you $37 per year for Years 1-4, $68 per year for Years 5-7, and $40 per year for Years.
How might the policy be exasperating the recession : How might this policy be exasperating the recession (hint - think of savers and the wealth effect). Why do you think this is the case?
What is the value of the firm tax shield : What is the value of the firm's tax shield (i.e. the change in firm value due to the use of leverage in the capital structure)?
Analyze all of the sustainability stakeholders at top shelf : Analyze and list all of the sustainability stakeholders at Top Shelf. Does each group have equal weight throughout the program development process?
What is the dividend yield : The last annual dividend was $2.10 a share and dividends are expected to increase at a constant 3.25% percent per year. What is the dividend yield?
What is the amount of the last dividend paid : The market rate of return on this stock is 14%. What is the amount of the last dividend paid?

Reviews

Write a Review

Microeconomics Questions & Answers

  Theory of market failure

How government intervention in the form of a tax on producers can make the post-policy outcomes even worse than the pre-policy position and explain the underlying economic logic of this proposition.

  Evaluating the accounts payable of a certain firm

An auditor wishes to determine a rule to use in evaluating the accounts payable of a certain firm. There are 5000 such accounts. The auditor considers the accounts as satisfactory if there are mistakes in only 1% of them.

  Suppose that the probability that a used bike is a lemon

suppose that the probability that a used bike is a lemon low quality is p and the probability that a used bike is a

  What is the representative firm level of production

Let's start in the short-run with this market. Suppose the short-run price in this market is $100. What is the market quantity in this market given this short-run price? What is the representative firm's level of production given this short-run price

  Why might the british governments critics

Why would a high level of British nominal interest rates relative to German rates have suggested an expectation of high future British inflation? Can you think of other explanations?

  What is the minimum annual production level

Your company is considering the introduction of a new product line. The initial investment required for this project is $500,000, and annual maintenance.

  Example of discretionary fiscal policy

Which of the following is an example of discretionary fiscal policy - If the Congress and the president want to keep real GDP at its potential level in 2014, they should buy Treasury securities.

  Find real wage-employment-output and unemployment

Consider an economy where, consumer’s utility function is given as U(C,L)=C-(1/2)L2 . Where C is consumption and L is labor. The production technology is Y=(1.6)L-(1/2)L2. The turnover cost per labor is (0.36)/(w/p)

  How to improve effectiveness and ease of management

Entitlement programs affect the economy in many ways, yet they are considered by many as not being managed efficiently. Explain how you would improve some of these programs to ensure their effectiveness and ease of management.

  State difference between classical and keynesian economics

State the the difference between the classical and Keynesian economics when it comes to self correcting mechanism and government intervention.

  Create greater inequality

If a new tax system encouraged more output but also created greater inequality, would it be desirable?

  Evaluate the article using economic concepts

Choose a topic from Micro economics that matters to you and find a recent news article covering that topic - Demand and supply of certain resources in Australia

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