Explain the effect of an expectation of a raise NEXT year on net borrowers



Explain the effect of an expectation of a raise NEXT year on net borrowers
3) A) Explain the Fisher Effect b) The current inflation expectation is low at about 1%, if the real rate of interest long term is 2%, what will be the yield on treasury bills based on Fisher Effect?
Explain, using the substitution and income effect, the effect of an increase of the capital market's interest rate. (tip: assume 2 type of agents: net borrowers and net lenders). a. According to the substitution effect, what happens with each type of agents savings? b. According to the income effect, what happens with each type of agents savings? c. What is the global (aggregate) result in terms of savings?
Currently the yield on 1- year bills is 4%. The consensus expectation is that next year 1 -year bills will yield 3%, and the year following 2%. a. If the pure expectations model of interest rates applies, what do 2- year notes now yield? b. What do 3- year note s now yield? c. Based on your answers, what does the slope of the yield curve tell you about market expectations for the future course of short -term inter est...
Question 8 1pts The effect of an import quota is to O raise the price and reduce the quantity of imports. O raise the quantity and reduce the price of imports lower the price and the quantity of imports. raise the price and the quantity of imports. Next s Previous
Explain expectation Computations.
Explain expectation computations
a/ Explain how expectation about future price and income will affect consumtion b/ Explain how expectation about future sale will affect investment c/ How will an increase in money supply affect aggregate demand
Explain why deflation can be so troubling to borrowers and lenders.
If inflation this year is higher than expected, then both lenders and borrowers will gain and the government will lose borrowers will gain at the expense of lenders both lenders and borrowers will lose lenders will gain at the expense of borrowers the government will lose unless it has implemented an indexed tax system
Suppose that a person earns $75,000 now and anticipates a 4% raise next year. The current nominal interest rate on savings is 5%. Prices are also expected to rise 2% next year. In real terms, how much can the person consume next year in real terms if they currently spend $65,000 on goods & services? *The answer is not $66,176.47