ECN 151 ECN151 Module 5 Homework Assignment (Allied American University)

ECN 151 ECN151 Module 5 Homework Assignment (Allied American University)

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ECN 151 Module 5 Homework Assignment (Allied American University)

PART I

1.For which of the two bonds in each example would you expect to generally pay the higher interest rate?  Explain why.

2.Identify each of the following acts as representing either saving or investment.

3.Demonstrate that whether you would prefer to have $225 today or wait five years for $300 depends on the interest rate.  Show your work.

4.Write the rule of 70.  Suppose that your great-great-grandmother put $50 in a savings account 100 years ago and the account is now worth $1,600.  Use the rule of 70 to determine about what interest rate she earned.

5.List three different ways that a risk-averse person can reduce financial risk.

6.Following the recession of 2001, there was a month in which employment and the unemployment rate both rose.  Assuming the computation was correct, how is it possible for both to have increased?

7.Why might a favorable change in the economy, such as technological improvement or a decrease in the price of imported oil, be associated with an increase in frictional unemployment?

8.What is the theory of efficiency wages?  Provide four reasons that employers might pay efficiency.

PART II


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