Impact of national debt that has to be paid off.

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Answer 1

Question

Chapter ST7, Problem 1CQ

To determine

Impact of national debt that has to be paid off.

Expert Solution & Answer

Explanation of Solution

The national debt is the amount of debt that the government owes to the public as well as to other institutions and agencies. The debt would be taken through borrowings such as the treasury bonds and other financial instruments by the government for meeting the fiscal deficit. The national debt will not be paid off because it will be financed and refinanced according to the needs of the government.

The debt can be refinanced when the creditor has faith in the debtor. The refinancing would help to restore the debt and that helps to continual debt outstanding. The national debt is not a serious issue to the economy as long as the interest paid for the national debt is below the potential GDP of the economy. When it goes higher, then the ability to pay by the borrower will be questioned and that would make the case complicated. Otherwise, the borrower can finance and refinance the national debt. It is being practiced widely by all the countries.

Economics Concept Introduction

National debt: The national debt is the summation of the debt owned by the government to the public and the other agencies of the economy.

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2. What is the payoff from a long futures position where you are obligated to buy at the contract price? What is the payoff from a short futures position where you are obligated to sell at the contract price?? Draw the payoff diagram for each position. Payoff from Futures Contract F=$50.85 S1 Long $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50.85 $50 $45 $40 $35 $30 $25 Short

3. Consider a call on the same underlier (Cisco). The strike is $50.85, which is the forward price. The owner of the call has the choice or option to buy at the strike. They get to see the market price S1 before they decide. We assume they are rational. What is the payoff from owning (also known as being long) the call? What is the payoff from selling (also known as being short) the call? Payoff from Call with Strike of k=$50.85 S1 Long $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50.85 $50 $45 $40 $35 $30 $25 Short

4. Consider a put on the same underlier (Cisco). The strike is $50.85, which is the forward price. The owner of the call has the choice or option to buy at the strike. They get to see the market price S1 before they decide. We assume they are rational. What is the payoff from owning (also known as being long) the put? What is the payoff from selling (also known as being short) the put? Payoff from Put with Strike of k=$50.85 S1 Long $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50.85 $50 $45 $40 $35 $30 $25 Short

Answer 2

Question

Chapter ST7, Problem 1CQ

To determine

Impact of national debt that has to be paid off.

Expert Solution & Answer

Explanation of Solution

The national debt is the amount of debt that the government owes to the public as well as to other institutions and agencies. The debt would be taken through borrowings such as the treasury bonds and other financial instruments by the government for meeting the fiscal deficit. The national debt will not be paid off because it will be financed and refinanced according to the needs of the government.

The debt can be refinanced when the creditor has faith in the debtor. The refinancing would help to restore the debt and that helps to continual debt outstanding. The national debt is not a serious issue to the economy as long as the interest paid for the national debt is below the potential GDP of the economy. When it goes higher, then the ability to pay by the borrower will be questioned and that would make the case complicated. Otherwise, the borrower can finance and refinance the national debt. It is being practiced widely by all the countries.

Economics Concept Introduction

National debt: The national debt is the summation of the debt owned by the government to the public and the other agencies of the economy.

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Answer 3

Question

Chapter ST7, Problem 1CQ

To determine

Impact of national debt that has to be paid off.

Expert Solution & Answer

Explanation of Solution

The national debt is the amount of debt that the government owes to the public as well as to other institutions and agencies. The debt would be taken through borrowings such as the treasury bonds and other financial instruments by the government for meeting the fiscal deficit. The national debt will not be paid off because it will be financed and refinanced according to the needs of the government.

The debt can be refinanced when the creditor has faith in the debtor. The refinancing would help to restore the debt and that helps to continual debt outstanding. The national debt is not a serious issue to the economy as long as the interest paid for the national debt is below the potential GDP of the economy. When it goes higher, then the ability to pay by the borrower will be questioned and that would make the case complicated. Otherwise, the borrower can finance and refinance the national debt. It is being practiced widely by all the countries.

Economics Concept Introduction

National debt: The national debt is the summation of the debt owned by the government to the public and the other agencies of the economy.

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Answer 4

Question

Chapter ST7, Problem 1CQ

To determine

Impact of national debt that has to be paid off.

Expert Solution & Answer

Explanation of Solution

The national debt is the amount of debt that the government owes to the public as well as to other institutions and agencies. The debt would be taken through borrowings such as the treasury bonds and other financial instruments by the government for meeting the fiscal deficit. The national debt will not be paid off because it will be financed and refinanced according to the needs of the government.

The debt can be refinanced when the creditor has faith in the debtor. The refinancing would help to restore the debt and that helps to continual debt outstanding. The national debt is not a serious issue to the economy as long as the interest paid for the national debt is below the potential GDP of the economy. When it goes higher, then the ability to pay by the borrower will be questioned and that would make the case complicated. Otherwise, the borrower can finance and refinance the national debt. It is being practiced widely by all the countries.

Economics Concept Introduction

National debt: The national debt is the summation of the debt owned by the government to the public and the other agencies of the economy.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter ST7, Problem 1CQ

To determine

Impact of national debt that has to be paid off.

Expert Solution & Answer

Explanation of Solution

The national debt is the amount of debt that the government owes to the public as well as to other institutions and agencies. The debt would be taken through borrowings such as the treasury bonds and other financial instruments by the government for meeting the fiscal deficit. The national debt will not be paid off because it will be financed and refinanced according to the needs of the government.

The debt can be refinanced when the creditor has faith in the debtor. The refinancing would help to restore the debt and that helps to continual debt outstanding. The national debt is not a serious issue to the economy as long as the interest paid for the national debt is below the potential GDP of the economy. When it goes higher, then the ability to pay by the borrower will be questioned and that would make the case complicated. Otherwise, the borrower can finance and refinance the national debt. It is being practiced widely by all the countries.

Economics Concept Introduction

National debt: The national debt is the summation of the debt owned by the government to the public and the other agencies of the economy.

Answer 6

Chapter ST7, Problem 1CQ

To determine

Impact of national debt that has to be paid off.

Expert Solution & Answer

Explanation of Solution

The national debt is the amount of debt that the government owes to the public as well as to other institutions and agencies. The debt would be taken through borrowings such as the treasury bonds and other financial instruments by the government for meeting the fiscal deficit. The national debt will not be paid off because it will be financed and refinanced according to the needs of the government.

The debt can be refinanced when the creditor has faith in the debtor. The refinancing would help to restore the debt and that helps to continual debt outstanding. The national debt is not a serious issue to the economy as long as the interest paid for the national debt is below the potential GDP of the economy. When it goes higher, then the ability to pay by the borrower will be questioned and that would make the case complicated. Otherwise, the borrower can finance and refinance the national debt. It is being practiced widely by all the countries.

Economics Concept Introduction

National debt: The national debt is the summation of the debt owned by the government to the public and the other agencies of the economy.

Answer 7

Chapter ST7, Problem 1CQ

To determine

Impact of national debt that has to be paid off.

Answer 8

Expert Solution & Answer

Explanation of Solution

The national debt is the amount of debt that the government owes to the public as well as to other institutions and agencies. The debt would be taken through borrowings such as the treasury bonds and other financial instruments by the government for meeting the fiscal deficit. The national debt will not be paid off because it will be financed and refinanced according to the needs of the government.

The debt can be refinanced when the creditor has faith in the debtor. The refinancing would help to restore the debt and that helps to continual debt outstanding. The national debt is not a serious issue to the economy as long as the interest paid for the national debt is below the potential GDP of the economy. When it goes higher, then the ability to pay by the borrower will be questioned and that would make the case complicated. Otherwise, the borrower can finance and refinance the national debt. It is being practiced widely by all the countries.