macroeconomics

[doggykick]

could anyone please help me out with these questions....got an exam in the mornin and any help would be greatly appreciated...thanks.


1. Suppose that there is a major collapse in domestic share prices
and investors try to get their money out of domestic shares to
put it into domestic real estate and overseas bonds. Explain
what has to happen for the investors to be able to do this, but
also highlight uncertainties that would need to be resolved in
order to make an assessment of the macroeconomic implications
of their behaviour.




2. Examine which kinds of households gain and which kinds of
households lose when interest rates rise, and consider their
likely responses in terms of theories of the consumption
function.

 

[nutmeg]

I'll take a stab at number 1, re uncertainties that would need to be resolved would be Cubism, the Donatist controversy and the wave theory of light.

 

[gnome]

Boy are you "fishing in a dry hole". ETers can barely figure out which of their "shot and a beer" to drink first.

 

[nutmeg]

Classically, the liquor is drunk in one gulp and chased immediately by the beer.

The liquor can be poured directly into an open beer can with some beer removed ahead of time, 'cpet I'm not sure how the beer is removed ahead of time, if you drink it or pour a little out. So I guess you're right.

 

[gnome]

Yeah, "classically".

 

[number22]

Quote from doggykick:

2. Examine which kinds of households gain and which kinds of
households lose when interest rates rise, and consider their
likely responses in terms of theories of the consumption
function.

Spending power gains; so does the house incomes; home and other asset decrease in its values;

Likely responses are selling assets and buy more liabilities.

 

[acronym]

Quote from doggykick:

could anyone please help me out with these questions....got an exam in the mornin and any help would be greatly appreciated...thanks.


1. Suppose that there is a major collapse in domestic share prices
and investors try to get their money out of domestic shares to
put it into domestic real estate and overseas bonds. Explain
what has to happen for the investors to be able to do this, but
also highlight uncertainties that would need to be resolved in
order to make an assessment of the macroeconomic implications
of their behaviour.




2. Examine which kinds of households gain and which kinds of
households lose when interest rates rise, and consider their
likely responses in terms of theories of the consumption
function.

I suspect, some other posters haven't been too kind.
This is easily answered.

Q1;a)
A miracle, see the currency runs of argentina and brazil; nobody CAN put their money into real estate, or overseas markets, in such circumstances.

Doesnt,cant, and will not ever occur.
Smart money has left the building, a long time ago. This resolves the second component of your first question, international creditors know these things, and can make awfully nice sums of money in restructuring, debt consolidation, rebuilding and refinancing-its actually cheaper than a war, money wise, and the profits are better by a large degree.

Q2;
Entirely redundant, in the circumstance of extreme economic collapse-households holding lots of stable foreign currency might live, beyond that, its dicey.

Perhaps you think im joking, but no-you might recall footage of people running AWAY from their own bank, in argentina, with their OWN money in a wheelbarrow. I figure they hoped to spend it, before they got home.

Rioting, looting, etc etc........




Questions answered