Principles of Macroeconomics 2e
2nd Edition
ISBN: 9781947172388
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 14, Problem 18RQ
What is the risk if a bank does not diversify its loans?
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3. Consider the market for paper. The process of producing paper creates pollution. Assume that
the marginal damage function for pollution is given by:
MDF = 3E
where damages are measured in dollars and E is the level of emissions. Assume further that the
function describing the marginal abatement cost of emissions is given by
MAC 120-E
where benefits are measured in dollars and E is the level of emissions.
a. Graph the marginal damage function (MDF) and the marginal abatement cost function
(MAC).
b. What is the unregulated level of emissions Eu? What is the social welfare of this emissions
level?
c. Assume an existing emission quota limits emissions to E = 60. Show on the graph why this
policy is inefficient. What is the deadweight loss caused by this policy?
show written calculation for B
Problem 1:
1. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate
present value of the stock, given that the discount rate is 5%?
2. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate
present value of the stock, given that the discount rate is 8%?
3. If a stock is expected to pay an annual dividend of $20 this year, what is the approximate
present value of the stock, given that the discount rate is 8% and dividends are expected to
grow at a rate of 2% per year?
Chapter 14 Solutions
Principles of Macroeconomics 2e
Ch. 14 - In many casinos, a person buys chips to use for...Ch. 14 - Can you name some item that is a store of value,...Ch. 14 - If you are out shopping for clothes and books,...Ch. 14 - For the following list of items, indicate If they...Ch. 14 - Explain why the money listed under assets on a...Ch. 14 - Imagine that you are in the position of buying...Ch. 14 - What are the four functions that money serves?Ch. 14 - How does the existence of money simplify the...Ch. 14 - What is the double-coincidence of wants?Ch. 14 - What components of money do we count as part of...
Ch. 14 - What components of money do we count in M2?Ch. 14 - Why do we call a bank a financial intermediary?Ch. 14 - What does a balance sheet show?Ch. 14 - What are a banks assets? What are its liabilities?Ch. 14 - How do you calculate a banks net worth?Ch. 14 - How can a bank end up with negative net worth?Ch. 14 - What is the asset-liability time mismatch that all...Ch. 14 - What is the risk if a bank does not diversify its...Ch. 14 - How do banks create money?Ch. 14 - What is the formula for the money multiplier?Ch. 14 - The Bring it Home Feature discusses the use of...Ch. 14 - Imagine that you are a barber in a world without...Ch. 14 - Explain why think the Federal Reserve Bank tracks...Ch. 14 - The total amount of U.S. currency in circulation...Ch. 14 - Explain the difference between how you would...Ch. 14 - Should banks have to hold 100 of their deposits?...Ch. 14 - Explain what will happen to the money multiplier...Ch. 14 - What do you think the Federal Reserve Bank did to...Ch. 14 - If you take 100 out of your piggy bank and deposit...Ch. 14 - A bank has deposits of 400. It holds reserves of...Ch. 14 - Humongous Bank is the only bank in the economy....
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