What will happen to interest rates in each of these cases

Assignment Help Econometrics

Reference no: EM131309028

1. Explain what will happen to holdings of bonds and money if there is an excess supply of money in the economy. What will happen if there is an excess demand for money in the economy? What will happen to interest rates in each of these cases?

2. The island nation of Macadamia recently experienced an 800 percent jump in tourism, increasing income throughout the island. Suppose the Macadamia money market was in equilibrium prior to the rise in tourism. What impact will the increase in income have on the equilibrium interest rate in Macadamia, assuming no change in the supply of money? What will the Macadamia Central Bank have to do to keep the increase in income from impacting the interest rate?

Reference no: EM131309028

Questions Cloud

Discuss about the business marketing : According to Lamb et al. (2014), business marketing differs from marketing to consumers only in terms of the use of the products or services - leaving out the consumer. Business marketing entails marketing to persons and businesses who will then o..

Role of a small-business consultant : Place yourself in the role of a small-business consultant. One of clients, Home Solutions, is considering opening two new stores. You know that businesses often experience cash flow problems due to continuous changes that occur in the industry, su..

Why would fear of inflation lead to losses for bondholders : Suppose you bought a $10,000 ten-year fixed rate bond issued by the U.S. Treasury in July 2007 that paid 5% interest. In July 2010, new seven-year fixed rate bonds were being sold by the Treasury that paid 2.43%. Explain clearly what was likely to..

Loan without compensating balance : Suppose your firm is seeking a six-year, amortizing $790,000 loan with annual payments and your bank is offering you the choice between a $839,000 loan with a $49,000 compensating balance and a $790,000 loan without a compensating balance. The intere..

What will happen to interest rates in each of these cases : Explain what will happen to holdings of bonds and money if there is an excess supply of money in the economy. What will happen if there is an excess demand for money in the economy? What will happen to interest rates in each of these cases?

Dividends- what is the current share price : Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 12 percent, and the company just paid a di..

Write c program that prompt the user to enter a line of text : Write a C program that prompts the user to enter a line of text (up to 50 characters). It should then convert the text entered to uppercase letters and then to lowercase letters, and then to Sentence case.

How will you conduct more research : How will you conduct more research? What do you need to know to make a recommendation? What is the purpose of your report?

Recommendation on the net present value of the outlay : Cautionary? Tales, Inc., is considering the acquisition of Danger Corp. at its asking price of ?$160,000. Cautionary would immediately sell some of? Danger's assets for ?$16,000 if it makes the acquisition. Danger has a cash balance of ?$1,600 at the..

User Account

All Pages