HomeworkLib
Question

Many people have difficulty borrowing as much money as they want, even if they are confident...

Many people have difficulty borrowing as much money as they want, even if they are confident that their incomes in the future will be high enough to easily pay back the borrowed funds. For example, many students in medical school will earn high incomes after they graduate and become physicians. if the could, they would probably borrow now in order to live more comfortably while in medical school and pay the loans back out of their higher future income. Unfortunately banks are reluctant to make loans to people who currently have low incomes, even if there is a good chance their incomes will be higher in the future. If people could always borrow as much as they want to, would you expect consumption to become more or less sensitive to current income? Please explain.

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer:

On the off chance that individuals could generally acquire as much as they need to, it is normal that utilization would turn out to be less touchy to current salary Banks are hesitant to give out credits effortlessly on the grounds that there is dependably a shot of terrible obligation, when understudies profit advances banks feel that they could conceivably return it in light of the fact that their occupations are not a settled return. The greater part of such credits is dependably on security premise with the goal that banks get a surety of return. Such bad debts are a cost to the bank, also if banks give out loans easily people will become less sensitive to income because of availability of loan, they would not reduce consumption even with fall in come so MPC is high, they would not like to save much and be dependent on loans The bank must be able to identify a return. If the loan is supposed to be paid back over say 30 years, this may represent the entire career of a physician. If the borrower borrowed TOO much, their income may never be able to cover the payment and the interest rate Besides, the hazard would need to be moderated with higher loan fees which may additionally debilitate the capacity of a borrower to pay back after some time except if they kept up their pay for a significant lot. Anything could take out the recompense, passing, mishap, the bank needs to safeguard the capacity to reimburse so current pay would turn into a lot greater factor

0 0
Add a comment
Know the answer?
Add Answer to:
Many people have difficulty borrowing as much money as they want, even if they are confident...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • ny people have difficulty borrowing as much money as they want, even if they are confident...

    ny people have difficulty borrowing as much money as they want, even if they are confident that their incomes in the future will be high enough to easily pay back the borrowed funds. For example, many students in medical school will earn high incomes after they graduate and become physicians. if the could, they would probably borrow now in order to live more comfortably while in medical school and pay the loans back out of their higher future income. Unfortunately...

  • The current economy is strong and many people are feeling confident about their future and ability...

    The current economy is strong and many people are feeling confident about their future and ability to pay off debt. Because of this they are taking on more bank loans for things like new cars, renovating their homes, or buying new homes. Using the four step process with this type of market, what will banks most likely do with their loans? They would to decrease the quantity supplied of loans and decrease the interest rate. They would increase the supply...

  • Many people have argued that an income tax should be​ "marriage neutral," that​ is, two people...

    Many people have argued that an income tax should be​ "marriage neutral," that​ is, two people should pay the same total tax whether they are married or they are single. Suppose Amanda earns​ nothing, Ben earns​ $60,000, and Cathy and Dylan each earn​ $30,000. They are all single. Amanda pays no tax because she has no income. If they all live in a country that has a progressive income​ tax, which will be​ higher: the tax that Ben pays or...

  • Writing in the New York Times, Simon Johnson, an economie MIT, makes the woment that people...

    Writing in the New York Times, Simon Johnson, an economie MIT, makes the woment that people side the United States may at some point decide to save less in which case they may hold onto their existing Unded States government debt but not want to buy so much of new issues) Source: Simon Johnson, "The Real Fiscal Risks in the United States," New York Times, December 6, 2012 Higher consumption and lower savings globally could negatively impact the US, because...

  • Your program will ask the user to enter the amount of money they want to borrow,...

    Your program will ask the user to enter the amount of money they want to borrow, the interest rate, and the monthly payment amount. Your program will then determine how many months it will take to pay off that loan, what the final payment amount will be, and how much interest was paid over that time. If the monthly payment amount isn't high enough to pay off more than one month's interest, your program should notify the user what the...

  • Please summarize the below article in your own words 500 words no plagiarism please How will...

    Please summarize the below article in your own words 500 words no plagiarism please How will ObamaCare Effect The Pharmaceutical Industry This November, President Obama was elected for another four years. This means that the Affordable Health Care act he implemented will be on the fast track toward implementation within the next few years. Although there are people on both sides of the political world that both love and detest the plan, the overall effect on the pharmaceutical industry should...

  • 3 ways to diversify retirement savings beyond stocks Reluctant to put more of your hard-earned money...

    3 ways to diversify retirement savings beyond stocks Reluctant to put more of your hard-earned money aboard the roller coaster known as the stock market? Then it may be a good idea to diversify your retirement savings with other assets, which can reduce your overall risk. Here are three alternative investments that could help you accomplish retirement savings diversification outside the stock market. Just like any investment, each one comes with risks that should be carefully considered before making any...

  • 3 ways to diversify retirement savings beyond stocks Reluctant to put more of your hard-earned money...

    3 ways to diversify retirement savings beyond stocks Reluctant to put more of your hard-earned money aboard the roller coaster known as the stock market? Then it may be a good idea to diversify your retirement savings with other assets, which can reduce your overall risk. Here are three alternative investments that could help you accomplish retirement savings diversification outside the stock market. Just like any investment, each one comes with risks that should be carefully considered before making any...

  • Question 1 (1 point) Saved In a world without deposit insurance we would expect to see...

    Question 1 (1 point) Saved In a world without deposit insurance we would expect to see all the following EXCEPT: Question 1 options: frequent bank runs. the public being reluctant to deposit in banks. people keeping more money in cookie jars and under the mattress. Question 2 (1 point) Saved All the following are current regulations on banks, EXCEPT: Question 2 options: Banks need to show their books to on-site examiners. Banks need to hold a certain amount of capital...

  • Use the below story and post your feelings on what these changes may mean to the...

    Use the below story and post your feelings on what these changes may mean to the industry in terms of research, jobs, marketing, and profitability. More information: How did Obama care changes means  to the industry Research, jobs, marketing, and profitability. 500 words no plagiarism no bullet points please. Obama healthcare plan also called affordable health care plan. The plan emphasized more on preventive care by adoption of more of screening tests and preventive measures like vaccination. It also stresses on...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT