Financial Assets 1
A securitized financial asset that represents a company or government's promise to pay back a certain anount of money by the maturity date of the asset.
Bonds/ a bond
A collection of parts of individual stocks split up and managed by a fund manager
A mutual fund
This term refers to a policy change or action that would make everyone better off, and is preferred by everyone
Pareto preferred
The three resources that govern long run growth and development
Resources, Institutions, and Tech.
Nauru has an abundance of this natural resource
Phosphate ore
Bonds represent debt, while stocks represent________
ownership over a company
The stock market historically outperforms these financial assets
bonds
When people take too much of a common resource good
Tragedy of the commons
This resource is the easiest to adjust in the short run
Labor (hiring or firing people)
Brain drain
If a bond has a $500 face value and pays out $10 coupons every year, what is the coupon yield rate for this bond?
2%
A bond has a 10% coupon yield rate and pays $25 coupons every year. What is the face value of this bond?
$250
If cigarettes cause $8 worth of external damages for each carton smoked, what is the optimal tax for a carton of cigarettes?
$8
A special capital-seeking hurricane comes through town and destroys all of the capital (everyone is ok otherwise). What will happen to real output as the town slowly recovers and increases their capital levels again.
Y increases at a decreasing rate until we hit steady state
increased savings rates
This is a decentralized asset, where no one individual or entity controls the quantity in circulation
cryptocurrency
A "Pump and Dump" scam involves youtubers or inlfluencers overhyping the value of cryptocurrency or a specific coin. Use a supply/demand graph to depict how this works, and the price that these influencers pay when they buy the asset vs when they "pull the rug"
Demand shifts outwards, increasing price
The Tiebout model states that when people vote on local taxes and expenditure of public goods we decide by__________
voting with our feet
If a ship gets stuck in the canal of an international shipping hub (it gets really stuck) it will greatly increase the shipping costs for everyone. At the same time government spending increases to build a new pro sports dome for an international competition. Label how BOTH of these scenarios will affect the economy in the short and long run
SRAS shifts inward while AD shifts outward. Both changes are temporary with no change to Y in the long run, but a big rise in price levels in the short run
The federal US government spends the most on this single program
Social Security retirement
If a stock has a B>0, then what will happen to this stock during a recession
It will rise in value
A bond has a maturity date in 10 years and has a $200 face value. If the bond has a 4% coupon yield rate with a 5% real interest rate, what is the present value of the stream of coupon payments?
$8 coupons over 10 years at a 5% real interest rate. For $61.77 today
In a market with downward sloping demand and perfectly elastic supply, who would bear the burden of a tax on the market?
Consumers of the good/service (the more inelastic one)
A country invents antigravity technology. Depict these changes in the LRAS/AD model
Both SRAS and LRAS shift outward. (Eventually AD will shift outward once we use that technology to make enough stuff for people to make more money and wages adjust)
Argentina is the largest economy to try this controversial move
Adopting the US dollar as their official currency