Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Concept explainers
Question
Chapter 17, Problem 1DQ
To determine
Given scenarios represent the economic investment or financial investment.
Expert Solution & Answer
Explanation of Solution
Susan is making a financial investment because she simply exchanges her asset with an existing asset in order to have some expected financial gains. There is no addition or replacement of capital stock.
On the other hand, New York City is making economic investment because it is issuing bonds for raising money in order to pay for the new tunnel linking New Jersey and Manhattan. There is simply addition of new capital stock in the form of new tunnel (linking New Jersey and Manhattan).
Economics Concept Introduction
Concept introduction:
Economic investment: This type of investment includes new addition of capital stock or replacement of the capital stocks that has been worn out.
Financial investment: This type of investment includes either purchasing an asset or building an asset in order to have some expected financial gains.
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Students have asked these similar questions
Please use the graph to answer the questions.
Given the market conditions, what will the prevailing
interest rate be?
O 6%
18%
O 2%
10%
Given the market conditions, how much money is
borrowed in the loanable funds market?
O $10 billion.
$50 billion
O$90 billion
O $70 billion
$30 billion.
Interest rate (%)
18-
16-
14-
12.
10.
8-
6-
+
et
0
Demand
Supply
60 70 80 90
10 20 30 40 50
Quantity of loanable funds (in billions of dollars)
Manipulate the graph to show what will happen to supply and
demand in the market for loanable funds when the
government budget deficit increases, changing the
equilibrium quantity of loanable funds by 3
percentage points.
Ceteris paribus, what is the new interest rate?
interest rate:
Ceteris paribus, private investment would
increase.
not change.
decrease.
%
20
10
9
Supply
8
Interest rate (%)
7
CO
5
LO
3
2
1
0
0
2
Demand
4 6 8 10 12 14 16 18 20 22 24 26 28
Quantity of loanable funds (% of GDP)
A Company's stock currently pays a dividend of $5 dollars per year and you expect that dividend to grow by 3% every year, forever, such that next year you expect the dividend to be 5.15, to be 5.3045 the year after that, and so on. If your discount rate is 9%, a fair price for this stock today is_____.If your discount rate were to fall to 7%, holding all else the same, the fair price of the stock would increase to_________.
Chapter 17 Solutions
Macroeconomics
Ch. 17 - Prob. 1DQCh. 17 - Prob. 2DQCh. 17 - Prob. 3DQCh. 17 - Prob. 4DQCh. 17 - Prob. 5DQCh. 17 - Prob. 6DQCh. 17 - Prob. 7DQCh. 17 - Prob. 8DQCh. 17 - Prob. 9DQCh. 17 - Prob. 10DQ
Ch. 17 - Prob. 11DQCh. 17 - Prob. 12DQCh. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 8RQCh. 17 - Prob. 9RQCh. 17 - Prob. 10RQCh. 17 - Prob. 1PCh. 17 - Prob. 2PCh. 17 - Prob. 3PCh. 17 - Prob. 4PCh. 17 - Prob. 5PCh. 17 - Prob. 6P
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