Assignment No. 2
Assignment No. 2ssignment No. 2
Academic Year:1439-1440 H
Student grade: / 3
Level of ticrks:
Q.1.Three students have each saved $1,000. Each has an investment opportunity in which he or she can invest up to $2,000. Here are the rates of return on the students’ investment projects:
If borrowing and lending is prohibited, so each student uses only his or her saving to finance his or her own investment project, how much will each student have a year later when the project pays its return?
Now suppose their school opens up a market for loanable funds in which students can borrow and lend among themselves at an interest rate r. What would determine whether a student would choose to be a borrower or lender in this market?
Among these three students, what would be the quantity of loanable funds supplied and quantity demanded at an interest rate of 7 percent? At 10 percent?
At what interest rate would the loanable funds market among these three students be in equilibrium? At this interest rate, which student(s) would borrow, and which student(s) would lend?
At the equilibrium interest rate, how much does each student have a year later after the investment projects pay their return and loans have been repaid? Compare your answers to those you gave in part (a). Who benefits from the existence of the loanable funds market—the borrowers or the lenders? Is anyone worse off?
Think of the last important decision you made about how to allocate your time. What were your opportunity costs? Did you make the right decision?
Reasons why productivity is important are numerous. Although productivity increases can have a negative impact in an economic situation where the productivity increases at a faster rate than the growth of the economy, generally, productivity increases typically have a positive impact. Simply, productivity is an important competitive issue. It can be important and reviewed on three levels: national, organizational, and personal.