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choli [55]
3 years ago
15

In countries where inflation is expected to be high, interest rates also will be high, because investors want compensation for t

he decline in the value of their money. This relationship is referred to as the___________.
Business
1 answer:
Degger [83]3 years ago
5 0

Answer:

Fisher effect

Explanation:

Fisher effect is the effect in the economic theory that is established by the economist Irving Fisher, which states the relationship among the inflation and both nominal and the real interest rates.

This effect state that the real rate of interest equals to the nominal rate of interest deduct the expected inflation rate.

So, the relationship which is mentioned in the question is the fisher effect as it state the rate of interest that reflect the expectations likely the future inflation rates.

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The correct answer is D. 10.00%

Explanation:

To get internal rate of return we use excel or a spreadsheet.  See document attached.

Make the cash flow to solve this problem.  At moment 0 we have the investment cost , in this case $1.475.668 (negative) From period 1 to period 5, we have different incomes o benefits.  Salvage value is 1.615.205, we are going to get it at moment 5 (positive).

Then, we calculate the Net cash flow that is the difference between benefits and cost.

We use all the result (positive and negative) in Net cash flow to get the IRR.

Net Present Value (NPV) 768907

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What are the tools of macroeconomic policy?
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Answer:

° Fiscal policy

° Monetary policy

° Exchange rate policy

Explanation:

Macro economics policy are tools used by a country's government through their central bank to influence the supply of money, control interest rate in their economy which will lead to economy stability and growth. The tools are explained below. An increase in government spending will make funds available to the household and firms hence increases the volume of money supply in the economy, while a decrease in government spending will also reduce the availability of money to household and firms.

° Fiscal policy . This refers to the use of tax and government expenditure to regulate the supply of money an economy. For instance, government through its central bank uses tax cut to increase the flow of money in an economy. Also, if the government feels that the supply of money in circulation is too much, which could result in inflation, government can increase taxes to be paid by individuals, firms and businesses which in turn will reduce the availability of money.

° Monetary policy. Monetary policy refers to various tools used by the government to control the flow of money in an economy, which includes open market operation, special reserves, interest rate adjustment. For instance, the government through CBN could buy or sell government issued securities which will ultimately affect the supply of money in an economy. Also, there is usually a minimum amount of reserves which must be held by commercial banks, which ultimately affects the supply of money. An increase in reserve ratio reduces the ability of banks to lend money to their customers while and a reduction in the reserve ratio increases their ability to lend to the public hence increases money supply.

° Exchange rate policy. The value of a country's currency in relation to other country's currency is referred to as exchange rate. Exchange rate policy is used to control inflation, preserve the value of domestic currency and also to maintain a favorable external balance of payments of a country.

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