Answer:
1.The money demand will rise by 1.154%
2. The money demanded will fall and for a 1% increase in interest , the money demanded will fall by 0.38%
Explanation:
1. Money demand function
ln(m) = β0 +β1 ln(GDP)+β2R
Suppose β1 = 1.5 , β2 = −0.04 , GDP = $ 100 & R = 3%
ln(m) = 1.5 ln ($100) - 0.04 X 0.03
ln(m) = 6.91
m = 1002.247
Suppose the GDP increases by 1%; the new GDP will be = $ 101
ln(m) = 1.5 ln ($101) - 0.04 X 0.03
ln(m) = 6.92
m = 1013.81
If the GDP increases by 1% ,the money demand will rise by 1.154%
2.
If the interest rate increases from 3% to 4%
ln(m) = 1.5 ln ($100) - 0.04 X 0.04
ln(m) = 6.906155
m = $ 998.400
If the interest rate rises from 3% to 4% , the money demanded will fall and for a 1% increase in interest , the money demanded will fall by 0.38%
Answer:
The current share price if the required return on this stock is 16 percent is $50.
Explanation:
price = dividend next year /(required rate of return - growth rate)
= 6/(16% - 4%)
= 50
Therefore, The current share price if the required return on this stock is 16 percent is $50.
Answer:
Economic models often vary greatly in assumptions and simplifications.
Explanation:
Most models in Classical Economics are based on a lot of generalizations and simplifications, that intend to model the behavior of the situations of the real world but often fail to encompass all the intricacies and complications that even most straightforward situations present. These simplifications help the Economists figure out the mathematical laws that are governing the real world economic systems. Therefore making the economic modeling a simpler process.
Classic economics implies three basic assumptions:
1- People behave rationally in any situation.
2- Firms and individual want to maximize profit and utility
3- People act independently based on available information.
Answer:
Balance Sheet / Statement of Financial position is used to measure the current financial position of the company.
Explanation:
Balance Sheet / Statement of Financial position is used to measure the current financial position of the company. It shows the value of assets liabilities and capital invested in the company. It also provides the net financial value of the company after paying all the liabilities. On the other hand the Income statement or Statement of Financial performance shows the performance of the company in a specified period of time.
Answer:
The percentage loss will be "-9.08%". The further explanation is given below.
Explanation:
The given values are:
Invested amount
= 20,000
Price of purchase
= $66
Total number of shares
= 500
The borrowed amount will be:
= 
= 
When the price increase to 69.63, the gain will be:
= 
= 
($)
The total gain will be:
= 
= 
Increase in percentage will be:
= 
= 
%
Whereas if price stays quite well at $66, there is really no increase, so the percentage growth would be 0%.
If the price declines toward a loss of 62,37 per share:
= 
= 
Now,
The total loss will be:
= 
= 
The percentage loss will be:
= 
= 
(%)
