Keynesian economics argues that demand drives supply and that healthy economies spend or invest more than they save. To create jobs and boost consumer buying power during a recession, Keynes held that governments should increase spending, even if it means going into debt.
Keynesian economics is a variety of macroeconomic theories and models of how aggregate demand significantly affects economic output and inflation. From a Keynesian perspective, aggregate demand does not necessarily match the economy's capacity. Instead, it is influenced by many factors that affect production, employment, and inflation.
Keynesian economists generally argue that aggregate demand is volatile and unstable, and as a result, market economies often experience inefficient macroeconomic consequences. They further argue that these economic fluctuations can be mitigated through coordinated economic policies between governments and central banks. Fiscal and monetary policy measures, in particular, help stabilize economic output, inflation, and unemployment throughout the business cycle. Keynesian economists generally advocate a regulated market economy. Although primarily the private sector, it plays an active role in government intervention during recessions.
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Answer:
$2,500,000
Explanation:
Break Point = Level of debt / Weight of debt
(100%-40%)
=60%
Hence:
= 1,500,000 / 60%
= $2,500,000
Therefore the debt breakpoint in the MCC schedule will be $2,500,000
Answer:
The Answer is B) Rises in the secondary market decreases.
Explanation:
When the coupon rate on newly issued bonds<u> decreases</u> relative to older, outstanding bonds, the market price of the older bond rises in the <u>secondary market.</u>
<u></u>
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate
For example, a $2,500 bond with a coupon of 10% pays $250 a year. Typically these interest payments will be semiannual, meaning the investor will receive $250 twice a year.
If two bonds offer different coupon rates while all of their other characteristics (e.g., maturity and credit quality) are the same, the bond with the lower coupon rate generally will experience a greater decrease in value as market interest rates rise.
Bonds offering lower coupon rates generally will have higher interest rate risk than similar bonds that offer higher coupon rates.
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Answer:
The market price if the bond has a par value of $2,000 is A. $1,790.11
Explanation:
The Market Price, PV of the Bond can be determined as follows :
PMT = $2,000 × 5.80% = - $116
P/yr = 1
YTM = 7 %
n = 14
Fv = - $2,000
Pv = ?
Using a financial calculator, the Market Price, PV is $1,790.1088 or $1,790.11.
