LEARN MORE...

Monetary Policy

Content type

User Generated

Subject

Economics

Type

Homework

Uploaded By

fgneqbanyq96

Pages

5

Showing Page:

1/5

Sign up to view the full document!

Showing Page:

2/5

Sign up to view the full document!

Showing Page:

3/5

Sign up to view the full document!

End of Preview - Want to read all 5 pages?

Unformatted Attachment Preview

Running head: MONETARY POLICY 1 Monetary Policy Name Professor Date MONETARY POLICY 2 Introduction Monetary policy plays an important role in the management of money circulating in the economy. Demand and supply of money in the economy is controls by use of monetary policy tools (Johnson, 2017). Federal reserve imposes the policies, which control the money circulating in the economy. Demand for money relates to the willingness of an individual to hold liquid cash for different motives. Supply of money refers to the sum of money circulating in the economy under the control of the Federal Reserve (Johnson, 2017). It is important to note that the Federal Reserve has limited ability to control the cash holding by individuals. Demand for money The desire for people to hold money in form of liquid assets is what constitutes to demand for money. According to economist John Maynard Keynes, three motives influence people’s demand for money (Deleplace, & Nell, 2016). The motives are transaction motive, speculation motive, and precautionary motive. Uncertainties about the future returns on investments motivate people to hold money instead of investing in businesses (Deleplace, & Nell, 2016). The classical theory of demand for money developed by fisher is based on the medium of exchange function of money (Johnson, 2017). The purchasing power of money increases people’s desire to hold liquid cash. The value of good and service purchased must be equal to the number of transaction ...
Purchase document to see full attachment

Tags: macroeconomics economics ECON293

User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Studypool

4.7

Indeed

4.5

Sitejabber

4.4

24/7 Study Help

Stuck on a study question? Our verified tutors can answer all questions, from basic math to advanced rocket science!

Post question

Quantitative Techniques in Financial Valuation Problem Se

Purpose of Assignment The purpose of this assignment is to provide students an opportunity to practice and learn the time- ...

Quantitative Techniques in Financial Valuation Problem Se

Purpose of Assignment The purpose of this assignment is to provide students an opportunity to practice and learn the time-value of money concepts covered during Week 4. Students will understand how to evaluate future values, present values, interest rates, and time periods for financial investments.Assignment StepsResources: Quantitative Techniques in Financial Valuation Problem Set Excel® TemplateSave the Quantitative Techniques in Financial Valuation Problem Set Excel® Template to your computer.Read the instructions on the first tab.Complete the twelve exercises located in the template and record your answers in the highlighted spaces.

Economics Overview of the Automobile Industry_Future and Present

Write 1500 words on the automobile industry.Paper should focus on "Current status of the industry in terms of workforce em ...

Economics Overview of the Automobile Industry_Future and Present

Write 1500 words on the automobile industry.Paper should focus on "Current status of the industry in terms of workforce employed (direct or indirect), technology, geographical distribution etc."And "Prediction for near future and long run future profit levels for the industry."

7 pages

International Financing.edited

An international bank is a bank located in any country, but it welcomes clients from all around the world, it is not linke ...

International Financing.edited

An international bank is a bank located in any country, but it welcomes clients from all around the world, it is not linked to the domestic government ...

11 pages

Monopoly Pricing

1. The Gulf Sea Turtle Conservation Group (GSTCG), a 501(c) (3) non–profit group of volunteers working to collect data o ...

Monopoly Pricing

1. The Gulf Sea Turtle Conservation Group (GSTCG), a 501(c) (3) non–profit group of volunteers working to collect data on nesting sea turtles and to ...

UCLA Financial Economics & Monthly Payment Exam Practice

1. (20) Automobile dealerships often advertise promotions such as \no payments for 90 days!" or similar deals that sound t ...

UCLA Financial Economics & Monthly Payment Exam Practice

1. (20) Automobile dealerships often advertise promotions such as \no payments for 90 days!" or similar deals that sound too good to be true. The goal, of course, is to entice buyers with the ever-tantalizing prospect of getting something now without having to worry about how to pay for it until later. Suppose that you are looking to buy a car priced at $35,000 and are oered a loan with a down payment of $5,000 and an APR of 6% over 60 months. (a) (5) Calculate the monthly payment for this loan. (b) (5) Now suppose that the dealer oers you \no money down, no interest, and no payments for 90 days!" and you naively interpret this to imply that the remaining payments are unchanged. In present value terms, what price do you think that you are paying for the car? (c) (5) Somewhat coming to your senses, you realize that your monthly payment will go up to oset the missing initial payments, but still believe that you will see some savings because of the time value of avoiding interest for three months. What monthly payment do you calculate and what do price do you think you are paying? (d) (5) Finally, you realize that if the dealer had any intention of oering you a discount, he would have let you know how much you'd be saving, and that \no interest" simply means that any unpaid interest is added to the principal. What is your actual monthly payment? 2. (20) One of the shortcomings of the dividend discount model is that it assumes that the rm can grow at the same rate indenitely, and projecting a company's future prospects based only on a brief snapshot of its current status can lead to wildly unrealistic estimates of its growth opportunities. Suppose that shares of Fly By Night Inc. are currently priced at P0 = 100, compared to a book value of B0 = 20 per share, with forecasted earnings of E1 = 8 and a scheduled dividend payment of D1 = 3 per share. (a) (5) Using the constant growth model, estimate Fly By Night's growth rate g and market capitalization rate r. Do these numbers seem plausible to you? (b) (5) Upon closer inspection, you observe that all of Fly By Night's growth opportunities consist only of a single investment project this year. After this year it cannot repeat this or undertake any other positive NPV project, and must pay out all subsequent earnings to shareholders. Suppose you believe that you are the only one who is aware of this, while all other investors are convinced that the stock will continue growing at the same rate forever. What should the stock be priced at?

Similar Documents

Harvard School of Business Econometrics Simple Linear Regression Paper & Excel

To complete this assignment, please rely on the data set “Computer_Exercise6.xlsx”. The latter is a cross-sectional da...

APUS Influence of Health & Social Indicators on the Economic Growth Capstone

You are attempting to establish what the existing literature says about Health and Social Indicators on the economic grow...

research the 1940's

I am one of two in my group, I need to research the 1940's only and provide 4 sources....

BU Managerial Finance Discussion

1. Jackson Corporation’s bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 p...

Economics Time Warner Channel Bundle Not

Time Warner could offer the History Channel (H) and Showtime (S) individually or as a bundle of both.Suppose the reservati...

Cardiff University Financial Risk Management Practices Discussion

Discuss how financial institutions engage in financial risk management practices. Specifically, discuss the concepts of an...

Chapter 3 Problems Studypool

Financial Portfolio Selection Trends And Challenges Final

• Analysis is an effective way to build an effective financial portfolio with minimal • A financial portfolio combines...

Germany is recognized worldwide for the production of quality automobiles. The market has spread rapidly to other regions ...

Study help

Our tutors provide high quality explanations & answers.

Post question

Quantitative Techniques in Financial Valuation Problem Se

Purpose of Assignment The purpose of this assignment is to provide students an opportunity to practice and learn the time- ...

Quantitative Techniques in Financial Valuation Problem Se

Purpose of Assignment The purpose of this assignment is to provide students an opportunity to practice and learn the time-value of money concepts covered during Week 4. Students will understand how to evaluate future values, present values, interest rates, and time periods for financial investments.Assignment StepsResources: Quantitative Techniques in Financial Valuation Problem Set Excel® TemplateSave the Quantitative Techniques in Financial Valuation Problem Set Excel® Template to your computer.Read the instructions on the first tab.Complete the twelve exercises located in the template and record your answers in the highlighted spaces.

Economics Overview of the Automobile Industry_Future and Present

Write 1500 words on the automobile industry.Paper should focus on "Current status of the industry in terms of workforce em ...

Economics Overview of the Automobile Industry_Future and Present

Write 1500 words on the automobile industry.Paper should focus on "Current status of the industry in terms of workforce employed (direct or indirect), technology, geographical distribution etc."And "Prediction for near future and long run future profit levels for the industry."

7 pages

International Financing.edited

An international bank is a bank located in any country, but it welcomes clients from all around the world, it is not linke ...

International Financing.edited

An international bank is a bank located in any country, but it welcomes clients from all around the world, it is not linked to the domestic government ...

11 pages

Monopoly Pricing

1. The Gulf Sea Turtle Conservation Group (GSTCG), a 501(c) (3) non–profit group of volunteers working to collect data o ...

Monopoly Pricing

1. The Gulf Sea Turtle Conservation Group (GSTCG), a 501(c) (3) non–profit group of volunteers working to collect data on nesting sea turtles and to ...

UCLA Financial Economics & Monthly Payment Exam Practice

1. (20) Automobile dealerships often advertise promotions such as \no payments for 90 days!" or similar deals that sound t ...

UCLA Financial Economics & Monthly Payment Exam Practice

1. (20) Automobile dealerships often advertise promotions such as \no payments for 90 days!" or similar deals that sound too good to be true. The goal, of course, is to entice buyers with the ever-tantalizing prospect of getting something now without having to worry about how to pay for it until later. Suppose that you are looking to buy a car priced at $35,000 and are oered a loan with a down payment of $5,000 and an APR of 6% over 60 months. (a) (5) Calculate the monthly payment for this loan. (b) (5) Now suppose that the dealer oers you \no money down, no interest, and no payments for 90 days!" and you naively interpret this to imply that the remaining payments are unchanged. In present value terms, what price do you think that you are paying for the car? (c) (5) Somewhat coming to your senses, you realize that your monthly payment will go up to oset the missing initial payments, but still believe that you will see some savings because of the time value of avoiding interest for three months. What monthly payment do you calculate and what do price do you think you are paying? (d) (5) Finally, you realize that if the dealer had any intention of oering you a discount, he would have let you know how much you'd be saving, and that \no interest" simply means that any unpaid interest is added to the principal. What is your actual monthly payment? 2. (20) One of the shortcomings of the dividend discount model is that it assumes that the rm can grow at the same rate indenitely, and projecting a company's future prospects based only on a brief snapshot of its current status can lead to wildly unrealistic estimates of its growth opportunities. Suppose that shares of Fly By Night Inc. are currently priced at P0 = 100, compared to a book value of B0 = 20 per share, with forecasted earnings of E1 = 8 and a scheduled dividend payment of D1 = 3 per share. (a) (5) Using the constant growth model, estimate Fly By Night's growth rate g and market capitalization rate r. Do these numbers seem plausible to you? (b) (5) Upon closer inspection, you observe that all of Fly By Night's growth opportunities consist only of a single investment project this year. After this year it cannot repeat this or undertake any other positive NPV project, and must pay out all subsequent earnings to shareholders. Suppose you believe that you are the only one who is aware of this, while all other investors are convinced that the stock will continue growing at the same rate forever. What should the stock be priced at?