We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Macroeconomics and Microeconomics - Interest Rate - Assignment Example

Comments (0)
Q1) The money market rate is the interest rate that the investor gets as a result of its investments in money market instruments. The money market is a part of the financial sector of any economy where the investments, or the savings, are done for a time period of one year or less…
Download full paper
Macroeconomics and Microeconomics - Interest Rate
Read TextPreview

Extract of sample
Macroeconomics and Microeconomics - Interest Rate

Download file to see previous pages... A developed money market is essential to the development of an economy as it provides the sources of finance to carry out the necessary business transactions. Firstly, it provides the cash required on a short term basis to finance the working capital requirements of businesses and entire industries. Lenders can borrow the money from financial institutions to finance their necessary transactions and thus the money market allows the economy to keep running. It also helps to keep the financial institutions self sufficient as the institutions can recall their loans at any point if they need it. Money market instruments are significant for the central bank because it regulates and controls its monetary policy by increasing or decreasing the money market rates. It also provides the finances to the government who may issue treasury bills in order to finance its spending. (Importance of Money Markets) The money market rate is called the federal funds rate in the USA which is the lending of available funds from one institution to another on a short term basis. Q2) The above figure shows the graph of the U.S. Federal Funds rate and the Treasury Bill rate over a period from 1991 to 2009. The interest rates of money market funds usually tend to move in the same way as the future interest rates are based on the expectations. The year 1991 began with the federal fund rate and treasury bill rate set at 5.69% and 5.41% and was on a constant decrease until the year 1993, after which it began to rise and more or less maintained the same level until the year 2000. In the year 2001, the terrorist attacks in U.S. badly damaged the confidence in the economy and the people, both local and foreign, were not willing to invest in the U.S., therefore the federal bank and the government reduced the interest rates in order to encourage the spending. The interest rate encouraged the potential investors to increase the borrowing and the investments along with decrease the savings. The government, in 2004, increased the interest rates gradually and increased it constantly on a quarterly basis. After the interest rates reached a point of 4.5% to 5% in the year 2006, the world was hit by the recession and the central banks had to lower the interest rates to once again encourage the spending and investments in the U.S. economy to limit the recessionary impact on the economy. The government and the central bank still had to decrease the interest rates due to the recession and reached a low point of 0.16% in 2009. Q3) The above graph shows the money market rate and the treasury bill rate in Bahrain over the time period from 1991 to 2009. Again both the curves move in the same direction as they are based on the same expectations. The interest rates of Bahrain move in a direction similar to that of the U.S. because the currency of Bahrain Dinar is pegged to the U.S. Dollar. The Bahrain Monetary Agency (BMA) regulates the interest rates on a quarterly basis keeping the national and international indicators into consideration. The year 1991 began with a declining interest rate which was restored in 1993, similar to the case in the U.S. and the interest rates were more or less stable with only a few changes in it. This was the time when there was stability in the world throughout. However, in 2001 after the terrorist attacks, the economies throughout the world took a big hit especially the U.S. economy that had to lower the interest rates drastically until 2004. The same was followed by the Bahrain government ...Download file to see next pagesRead More
Comments (0)
Click to create a comment or rate a document
Therefore, eliminating taxes would prevent the government from reaching its desired revenue targets and this would result in a deficit between what the government spends and what it collects. Ans 2) A private good is one that is excludable in nature and is unique for every consumer.
3 Pages(750 words)Assignment
Macroeconomics vs. microeconomics
Macroeconomics It deals with the analysis of the entire economy including the issues that have the capability of affecting the economy. The issues related in macroeconomics are unemployment, economic growth, inflation as well as monetary and fiscal policies.
3 Pages(750 words)Essay
However, emerging countries, which were considered vulnerable are exhibiting a remarkable resiliency, and growth seems to point to the pre-2008 breakout levels. In essence, the performance exhibited by the emerging countries is viewed as a significant engine of expansion in regard to the present global economy (Lachman 64).
3 Pages(750 words)Assignment
Managing Interest Rate and Exchange Rate Volatility Assignment
We also present an overview of the types of exchange rate fluctuations the company can expect to face in coming years. Interest rate risk measures the sensitivity of a firm's cash flows, profit and firm value to interest rate fluctuations. In addition to the interest risk that a company might face as a result of changes in its cash flows, profit and firm value.
12 Pages(3000 words)Assignment
GDP measures specifically the total income and the total production of a nation. GDP is calculated by combining consumption, investment, government spending and net exports of a nation. It is important to note that GDP counts only
4 Pages(1000 words)Assignment
The equilibrium gets shifted which may be both a good and a bad occurrence. In economics, a good thing is one which earns the business while a bad one is that which
6 Pages(1500 words)Assignment
Applying utility function in investing enables the investor to understand the usefulness of investing in various securities as opposed to diverse ones. For example, fixed
3 Pages(750 words)Assignment
b. To be able to restore the economy to full employment; the government must find ways that it promotes local businesses. When local businesses experience a high demand from their products they increase their labor
1 Pages(250 words)Assignment
Similarly if he spends his entire budget on food then he will be able to consume 0 unit of water and 4 unit of food. The table below shows that how the consumer is able to allocate his budget on food and water.
8 Pages(2000 words)Assignment
us, as beef price increases and since the customers are price sensitive, the demand will decrease as the consumers will resort to consuming chicken since they lower priced. The consumers will thus reduce consumption of beef and increase consumption of chicken. The supply of
4 Pages(1000 words)Assignment
Let us find you another Assignment on topic Macroeconomics and Microeconomics - Interest Rate for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us