Economics Answers

1.   What are the functions of a central bank?

What is the history of money? (Step by step explain how humankind moved from barter trade to the kinds of money with have to day).

The population in country C decreases, due to a lower birth rate. At the same time, there is an increase in the cost of fertilizer, which is used to grow vegetables. Explain how the market for vegetables will be affected by these changes. Clearly indicate how the equilibrium price and equilibrium quantity will be affected by these changes. Make use of a combination of diagrams and verbal explanation to explain your answer. Note that your diagrams should be properly annotated and that marks will be deducted for any missing labels on your diagram.

Due to substantial increases in prices in Country A, the real income level of the population in Country A decreases. Show on a diagram how the decrease in the income level in Country A will affect the demand for meat, which is a normal good. Also indicate how the equilibrium price and equilibrium quantity of meat will change in Country A. The direction of any changes should be clearly indicated using arrows.

1. How can the five principles of economics help in decision making?

These are the five 5 principles; opportunity cost, marginal principle, law of diminishing returns, principle of voluntary returns and real/nominal principle.

2. Identify a real business scenario wherein your selected principle worked.

2. If the demand functions for the two consumers are:-

For consumer 1 Qd1= 10-4P1

For consumer 2 Qd2= 4-2P2

When the two prices are 3 birr.

a. Determine the market demand using the same price for the two functions?

3. The demand and supply for a 

Consider a market with freedom of entry and exit of firms. Suppose that all the firms are identical. The market demand curve

Question 1 

Ford Motor has decided to borrow money by issuing perpetual bonds with a coupon rate of 7%, payable annually, and a par value of $1,000. The 1-year interest rate is 7%. Next year, there is a 35% probability that interest rates will increases to 9% and a 65% probability that they will fall to 6%.

a. What will the market value of these bonds be if they are noncallable?

b. If the company decides instead to make the bonds callable in one year, what coupon will be demanded by the bondholders for the bonds to sell at par? Assume that the bonds will be called if interest rates fall and that the call premium is equal to the annual coupon.

c. What will be the value of the call provision to the company?

Which of the following statements is incorrect.

Select one:

A. If the population in South Africa grows at 5% per year, and the economic growth rate is 3% per year, a decline in the real GDP per capita occurs.

B. Stabilization policies refers to fiscal policy and monetary policy.

C. An increase in nominal GDP can result from an increase in the quantity produced of goods and services and or/the increase in the prices of goods and services produced.

D. An increase of 20% in the price of lamb meat is an example of inflation.

Consider two bonds, HI and LI. The HI bond has a 10% coupon rate and the

LI bond has a 5% coupon rate. Both bonds pay interest annually and are priced to yield

10%. Suppose the following interest scenarios are possible at the point in time when both

bonds have five years remaining to maturity: