ECO 304K Lecture Notes - Lecture 18: Dont

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scarletchimpanzee223

8 Nov 2016

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Varies by type of account, size of account, across time: banks also will trade you dollars today for future dollars by making you a loan, why trade future dollars for today dollars, big expenditure today--------------- > (e. g. house) ------------------, good investment opportunity----- Today (e. g. college)-------: expect to die soon----------------, higher income in the future-----, what determines demand for future dollars, lower income in the future----------------- (retirement)----------------------, good investment opportunity, higher expenses in the future. Demand for one os the supply of the other. Savings" consumption choice : i have a chance to buy a palacsintabot. Marginal value of a dollar is higher in. Marginal value of a dollar is higher today. Cost of ( in 1 yr): 500x 1/(1. 1) = . That is, i would need to deposit today at r=10% to replicate that stream of money. is the present discounted value of that stream of money is r= 10%

Related Questions

We sought out a soothsayer, who did sayeth some sooth. She stirred her cauldron and foresaw that terrible things would happen to Evanston. 100 years from this very day, the crimes of John Evans will come back to punish the residents of this town, causing $300 million dollars of damages. However, we can avert this terrible fate at the low, low cost of just $6 million dollars today (paid to descendants of those Evans wronged). That's right, for just $6 million dollars now, we can avert $300 million dollars of damage to future Evanston residents! You can't beat this deal!

1. What is the most we would be willing to pay to avert this future harm if our discount rate is 1.4% per year?

2. What is the most we would be willing to pay to avert this future harm if our discount rate is 4% per year?

taupemink72

Assume that the U.S. dollar and the Japanese yen are the only two currencies in the world.

a. A bilateral nominal exchange rate S is the spot (now) exchange value of one currency in terms of the other and S can be written as dollars per 1 yen or yen per 1 dollar. If S = yen/1 dollar = 76.92 then the inverse 1/S gives dollars per 1 yen where 1/S = 1/(yen/1 dollar) = 1/76.92 = .013. If the 1/S increases to .014, has the dollar appreciated (1 dollar is worth more yen) or depreciated (1 dollar is worth less yen)? Explain.

b. Changes in demand and supply in the foreign exchange (FX) market determine the value of floating exchange rates S. If S is expressed as S = yen/1 dollar, then we have the FX market in terms of the demand and supply of dollars. (If S = dollars/1 yen, then we get the FX market in terms of the demand and supply of yen. Note also that no matter which currency the FX market is expressed, it is still an FX market where dollars are exchanged for yen. This means that an upward-sloping supply of dollars curve is exactly the same as a demand for yen curve and a downward-sloping demand for dollars curve is exactly the same as a supply of yen curve). Using S = yen/1 dollar and the FX market in terms of the demand and supply of dollars, an increase in S (dollar appreciation) leads to an increase in the number of dollars supplied (increase in the quantity of yen demanded). For dollar demand (or the supply of yen), an increase in S (dollar appreciation) leads to a decrease in the number of dollars demanded (or an increase in the number of yen supplied). The dollar demand curve shifts to the right if more yen are offered for dollars at any exchange rate S. An increase in dollar demand is caused mostly by private sector transactions in the current and capital accounts. Either an increase in demand for U.S. goods (merchandise trade in the current account) or an increase in demand for U.S. stocks and bonds (capital account inflows) will shift the dollar demand curve to the right. If private transactions in the current and capital accounts also cause shifts in the dollar supply curve, what are the corresponding factors that would lead to an increase in dollars supplied (yen demanded) at any exchange rate S?

brownhorse801

Ben and Geri have changed their production methods and are now producing ice cream according to the production function,

Y=KL,

1. The price of a machine is R= 2 dollars and a laborer costs W= 1 dollar, the expenditure level E=$8, Determine the slope of the iso-expenditure curve

2. By setting the MRTS equal to the slope of the iso-expenditure curve, determine the mascot-minimizing capital-labor ratio (K/L) with R=2 and W=1. Given that the firm wants to produce Y=8 units of output, what is the optimal level of capita and labor for the firm? what is the cost-minimizing level of expenditure E when the firm produces Y=8 pints of ice cream?

3.Suppose the price of a laborer goes up to W=2. What are the new cost-minimizing levels of capital and labor given that Ben and Geri are still producing Y=8 pints of ice cream? What is the new cost-minimizing level of expenditure

sapphireeagle429

ECO 304K Lecture Notes - Lecture 18: Dont

ECO 304K Full Course Notes

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