Economics Answers

Consider a two year coupon bond, with an annual coupon of £500 and a
balloon payment of £2400. Suppose at t=0 the yield on a riskless bond that mature in
one year is 5% and the annualized yield on a two-year bond is also 5%.

Compute the present value, at t=0 of the bond.
What is the duration of the bond?
What is the meaning of duration and why this is an important feature to assess a bond?

A change in the required reserve ratio will impact a nation's money supply by changing the:
Group of answer choices

a. denominations of currency that are printed and available to banks.

b. amount that is held in excess reserves and the public's willingness to make deposits.

c. holdings of government bonds by the Federal Reserve and the cost of buying them.

d. size of the potential deposit multiplier and the amount that is held in excess reserves.

A firm in a purely competitive industry has a typical cost structure. The normal rate of profit in the economy is 8 percent. This firm is earning $15 on every $150 invested by its founders.

Instructions: Enter your answers as whole numbers.

a. What is its percentage rate of return? percent.

b. Is the firm earning an economic profit? .

If so, how large? percent.

c. Will this industry see entry or exit? .

d. What will be the rate of return earned by firms in this industry once the industry reaches long-run equilibrium? percent.

Which change in the rand-dollar foreign exchange market will cause ZAR (rand) to appreciate and the amount of USD traded daily increases?
A. a shift of the supply of the USD curve to the left
B. a shift of the supply of the USD to the right
C. a shift of the demand of the USD to the left
D. a shift of the demand of the USD to the right

What happens if the minimum wage is above equilibrium? (20)

There are 300 purely competitive farms in the local dairy market. Of the 300 dairy farms, 298 have a cost structure that generates profits of $24 for every $300 invested.

Instructions: Enter your answers as whole numbers.

a. What is the percentage rate of return for these 298 dairies? percent.

b. The other two dairies have a cost structure that generates profits of $22 for every $200 invested. What is their percentage rate of return? percent.

c. Assuming that the normal rate of profit in the economy is 10 percent, and firms cannot copy each other's technology, will there be entry or exit? .

Will the change in the number of firms affect the two that earn $22 for every $200 invested? .

What will be the rate of return earned by most firms in the industry in long-run equilibrium? percent.

If firms can copy each other’s technology, what will be the rate of return eventually earned by all firms? percent.

Most students pay no direct cost in terms of money for public education. To them the value of their education is a consumer surplus. Why doesn’t this result in lots of students demanding extra homework and remedial classes after school?

An increase in government spending in the Keynesian model leads to .....
1. Demand is greater than supply
2. Demand is lesser than supply
3. Demand that is equals supply
4. Decrease in production

welfare effect of this new legislation if the new minimum wage is (1) below the equilibrium wage and (2) above the equilibrium wage rate with labour hours as your quantity variable.

If wages are lower than equilibrium, then the demand for labor is much higher than supply, since for low wages few workers will agree to perform the specified amount of work.