Principles of Macroeconomics Coursework Rodoula Makri ECON101-EN Question 1: a) Price of substitute good falls - As seen on the diagram above when price of substitute product A rise‚ then demand for substitute product B rises accordingly. Positive relationship between the two. Shift to the right. b) Taste shifts away from the good - Whe the taste shifts away from the good it becomes less desirable‚ making its demand for it decrease. Shift to the left. c) Price of complimentary good
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of its record low interest rate that stands as an attempt to spur Aggregate Demand (AD)‚ The overall demand for all products in an economy at any given price level‚ in spite of an inflation rate of 2.7% that is above the target rate of 2%. BoE recognizes that in a period of extended economic contraction it is important to spur AD as any decrease in AD results in a loss of real output (RGDP). BoE only has the ability to do this using monetary policy and adjusting the interest rate to incentivize people
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inside the firm due to the agency cost of lending. Borrowers must compensate lenders for their expected costs of determining credit-worthiness. We also learn that a fall in net worth both increases the agency premium (the cost of borrowing) and decreases the borrower’s spending and production. The gist of the financial accelerator is that fluctuations in
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Integrated Case 6-21 Morton Handley & Company Interest Rate Determination Maria Juarez is a professional tennis player‚ and your firm manages her money. She has asked you to give her information about what determines the level of various interest rates. Your boss has prepared some questions for you to consider. A. What are the four most fundamental factors that affect the cost of money‚ or the general level of interest rates‚ in the economy? Answer: [Show S6-1 and S6-2 here.] The four most fundamental
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the business cycle model. Identify the 4 phases of the business cycle‚ label the points of interest‚ and show the US economy where it is today. What is the definition of full employment RGDP? (AKA the natural rate of unemployment). What must be true before it can be stated that a country is in a recession? The business cycle shows the alternating rises and declines in the level of economic activity‚ sometimes over several years. The Natural Rate of Unemployment
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In the early 1980’s the economy experiences a recession. A recession is “a significant decline in economic activity spread across the economy‚ lasting more than a few months‚ normally visible in real income‚ employment‚ industrial production‚ and wholesale-retail sales (Recession‚ Retrenchment‚ and Recovery: State Higher Education Funding & Student Financial Aid‚ 13).” Technically there were two recessions‚ the first was from January through July of 1980‚ and the second was from July 1981 through
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Economics 736 Business Conditions Analysis Kashian Quiz #1- Spring 2006 1. Suppose that the economy is characterized by the following equations: C = 160 + 0.6 Yd I = 150 G =150 T = 100 a. Solve for GDP (Y) Y = C+I+G Y=160+0.6(Y-100)+150+150 Y = 400 + 0.6Y Y = 1000 b. Disposable
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MACRO ASSIGNMENT – 24/6/13 Section 3 – Group No. 5 The relation between Macroeconomics and the Great Depression The Great Depression The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations‚ but in most countries it started in 1930 and lasted until the late 1930s or middle 1940s.It was the longest‚ most widespread‚ and deepest depression of the 20th century. The popular belief is that the Great
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know-how. Yuan exchange rate regime could affect China’s economic growth also can through two aspects: the first is through the level changes‚ namely exchange rate appreciation and depreciation; the second is through the flexibility changes‚ namely the exchange rate fluctuation range expansion. Theoretically‚ the adjustment of Yuan exchange rate could impact China’s economy from various channels‚ and it could also be impacted by the growth rate vice versa. The change of exchange rate regime could impact
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3 LIBOR 7 9 10 Floating Rate Received 8 10 11 Fixed Rate Paid 8 8 8 Swap Differential 0 2 3 Net Dollar Amount Received (Based on a Notional Value of $50 Million) 0 1000000 1500000 b. Determine the dollar amount to be received (or paid) by the counterparty on this interest rate swap each year based on the forecasts of LIBOR assumed above. ANSWER: Year 1 = $0; Year 2 = $1‚000‚000 paid; Year 3 = $1‚500‚000 paid 2. Interest Rate Caps. Northbrook Bank purchases
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