What factors might cause the interest rates to differ? Explain
What will be an ideal response?
There are about five factors that cause interest rates to differ: (a) Interest rates vary depending on the degree of risk involved in the loan. Loans with higher risk will command higher interest rates. (b) The maturity of the loan can affect the interest rate, with longer terms usually paying higher rates. (c) Loan size can be a factor; smaller loans tend to have higher interest rates than larger loans reflecting administrative costs. (d) Taxation can play a role in affecting loan interest rates. Taxable loans will command a higher rate than nontaxable loans. (e) Market imperfections can give a degree of monopoly power to some lenders causing somewhat higher loan rates.
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If a country has a fixed exchange rate,
A) the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency. B) the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency. C) central banks have more control over real GDP in the economy. D) central banks must buy and sell their holdings of currencies to maintain a given exchange rate.
Dorothy lives in a city with high air pollution. Pollution is a bad, but she is able to avoid air pollution by wearing a face mask. Her preferences are given by
U(q1,q2 ) = (q1 - P)2q22 where q1 is the amount of time she spends wearing a mask, P is the amount of pollution and q2 is a composite of other goods (p2 = 1 ). Dorothy must decide how much to wear a mask and how much q2 to purchase. The price of masks is pM. Assume q1* > P when answering this question. a. Derive Dorothy's demand for masks, q1*(p1,Y, P) b. How does the quantity of pollution affect the demand for masks? That is, find q1*/P. c. How does her income influence the quantity of masks she purchases? That is, find q1*/Y. d. What condition must hold for the assumption q1* > P to hold?
Most Americans believe that families really could get by on the government's definition of minimum needs if they tried hard
Indicate whether the statement is true or false
Which of the following statements is correct regarding a firm's decision-making?
a. The decision to shut down and the decision to exit are both short-run decisions. b. The decision to shut down and the decision to exit are both long-run decisions. c. The decision to shut down is a short-run decision, whereas the decision to exit is a long-run decision. d. The decision to exit is a short-run decision, whereas the decision to shut down is a long-run decision.