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Finance question

How much would you expect to receive for a nominal interest rate in Holland if funds can be invested in the U.S. at a rate of 7% when inflation is expected to be 4% in the U.S. and 8% in Holland? The company cost of capital for a firm with a 60/40 debt/equity split, 8% cost of debt, 15% cost of equity, and a 35% tax rate

Question about Floating exchange rate

A country has a lower inflation rate than all other countries, It has more rapid economic growth. The central bank does not intervene in the foreign exchange market. What can you say about each of the following (and why)?: a. The exchange rate? b. The current account balance? c. The expected exchange rate? d. The interest


U.S. GDP is expected to increase during the next 5 years. Unemployment seems to be taking a downturn as well. However inflation is expected to be higher than normal during this period as well with unemployment. As a financial analyst, how would you evaluate this forecast for your firm?

Basic economic questions

1. Explain the difference between nominal and real variables, and give two examples of each. According to the principle of monetary neutrality, which variables are affected by changes in the quantity of money? 2. According to the quantity theory of money, what is the effect of an increase in the quantity of money? 3. It is

Rents, Profits, and the Financial Environment of business

Hello, if someone could please assist me with this question from a text, we will be having this as an essay question and I need to familiarize myself with this topic. Thank you. What are the various incentives that investors have to hold TIPS (Treasury Inflated Protection Securities)? Why does the U.S. Treasury also hav


What is the difference between cost-push and demand-pull inflation? Which was the primary cause of inflation in the early 1970's? What type of inflation has the Federal Reserve been trying to prevent in 1998 and 1999?

Money in high inflation with negative real interest rates

1. What effect would a period of rapid inflation likely have on the role of money as a store of value, and on people's attitudes toward money generally? Why? 2. in 1973-75, real interest rates were actually negative. (a) what would a negative real interest rate mean? (b) what could explain such an unusual development?

annual growth rate

In 1955, the last year when social security payments included only old-age payment (before disability) payments that year totaled $4.9 billion. For 2001, the figure was $433 billion (excluding Medicare, which was another $218 billion). During that period, the CPI rose at an average annual rate of 4.2%, and the number of people

What affects monetary policy?

In a speech in January 2004, Fed chairman Alan Greenspan said, " I am increasingly of the view that, at a minimum, monetary policy in the last two decades has been operating in an environment particularly conducive to the pursuit of price stability. The principal features of this environment included (1) increases political sup

Inflation and wage demand

On July 20, 1993 Alan Greespan, chairperson of the Board of Governors of the Federal Reserve System, testified before a congressional committee. He said: "The role of expectations in the inflation process is crucial. Even expectations not validated by economic fundamentals can themselves add appreciably to wage and price pres

Economics question book the economy today schiller 10/e

Section 1: Graphical Analysis: For each question (numbers 1 through 14), choose an answer from the choices (A through E) below: A) The curve shifts to the right (outward) B) The curve shifts to the left (inward) C) Movement along the curve D) The market outcome is not on the curve E) No impact For Questions 1 thr

Rational Expectations

18. (Rational Expectations) Using an AD-AS diagram, illustrate the short-run effects on prices, output, and unemployment of an increase in the money supply that is correctly anticipated by the public. Assume that the economy is initially at potential output.


Suppose that in 2009 there is a sudden, anticipated burst of inflation. Consider the situations faced by the following individuals. Who gains and who loses? a. A homeowner whose wages will keep pace with inflation in 2009 but whose monthly mortgage interest payments to a savings bank will remain fixed b. An apartment land

How governments utilize monetarism

Traditional means of controlling inflation have to be used carefully as they can have unintended consequences. Interest rate increases negatively impact stock markets. At the same time, inflation must be kept within target limits, three per cent or less. Can alternatives to traditional monetarist devices be identified in mo

Oil and the American economy correlation

When Oil goes up, what is affected in the American economy and how? very briefly explain what happens (if anything) to each and why Consumption Investment Government Spending Imports Exports National Income Aggregate Supply Aggregate Demand Inflation Exchange Rates Interest Rates

Exchange rates

Do the following events cause the dollar to appreciate or depreciate against the Euro? 1. Health experts discover that red wine, espacially French or Italian red wine, lowers cholesterol. 2. GDP falls in nations across Europe. 3. The United States experiences a higher inflation rate than does Europe. 4. The United States

Finance Minicase Example

Finance example with regard to retirement and investment portfolios Background for Problem: Old Alfred Road, who is well known to drivers on the Maine Turnpike, has reached his seventieth birthday and is ready to retire. Mr. Road has no formal training in finance but has saved his money and invested carefully. Mr. Road own

Increase in Real wages

As I understand it, real wages do increase over time , as an economy grows and productivity increases. If this is the case , why can we not all afford to buy very expensive goods / services in 50 , or 100 years time ? It can not be because of inflation as by definition real wages have factored inflation in.

Aggregate Demand/Supply and the Current US Economic Condition notes

I am wondering, what is the general assessment of the US economy over the next year or two in tems of Real GDP growth and inflation....ignoring business cycle effects...just in tems of current conditions regarding the aggregate supply (AS) and aggregate demand (AD) sides of the US economy and their COMBINED EFFECT on Real GDP Gr

Solving Inflation Problems

Please help answering the following problems. 1) An economist has predicted that for the next five years, USA will have an 8% annual inflation rate, followed by five years at 6% inflation rate.This is equivalent to what average price. This is equivalent to what average price change per year for the entire ten year period?

Need Help with International Macro

2. A 1991 The Wall Street Journal cover page article entitled "Foreign Rate Increases May Worsen Slump" explained how the German central bank raised domestic interest rates in order to reduce inflation below the 3% level. At the same time, the U.S. central bank reduced domestic interest rates to fight the deepening recession in

Need Help with International Macro

2. England has not joined the European Monetary Union, but it is a member of the European Union. As a result, England has a flexible exchange rate and retains its own currency, the pound sterling. Suppose England's unemployment rate began to rise and the government passed an investment tax credit to help stimulate the economy.

Canadian federal gov't revenues and expenditures

Please answer using a yaer 1 macro Canadian perspective in your reply see attachment Please expand on the following (if correct): Answer: Increase in the output, employment will increase the government revenues due to the increase in taxes collected on profits, industrial production, and salaries. Inflation might not ha

Monetary policy and inflation

A. Suppose that the Fed Reserve adopts an inflation targe of 3% for its monetary policy. If the long run growth rate of real GDP(Y) is 2%, then at what rate would the quantity of money (or money supply) have to grow to meet this inflation target? b. In the short run, why might the Federal Reserve miss their inflation targe


To study the relationship between capacity utilization in manufacturing and inflation in the united states, Thomas Gittings obtained the following regression results based on the annual data from 1971-1988: ^ Y(sub(t))= -70.85 + .8880X(sub (t)) t= (-5.89) (5.90) r^2= 0.685 where Y= changes in inflation as mea