ditures and a decrease in the money supply expenditures and an increase in the m
ID: 1131497 • Letter: D
Question
ditures and a decrease in the money supply expenditures and an increase in the money supply ent expenditures and a decrease in the money supply c. a e in | 111 . Short Answers (20points) 1. Why does the GDP deflator give a different rate of inflation than the CP12(6 points) 2. Which of the two bonds in each example would you expect to generally pay the higher interest rate? Explain why. (8 points) a. a U.S. government bond or a Venezuelan government bond b. a U.S. government bond or a municipal bond with the same term and issued by a creditworthy municipality a 6-month Treasury bill or a 20-year Treasury bond a Microsoft bond or a bond issued by a new recording company c. d.Explanation / Answer
Answer:- Why does the GDP deflator give a different rate of inflation than does the CPI? (1) The GDP deflator
The GDP deflator uses as a basket of all final goods and services produced in the domestic economy, while the CPI basket includes goods and services purchased by typical consumers. (2) The GDP deflator is a variable weight price index, whereas CPI is mainly the fixed weight price index.
Answer:-
A:- The bond of Venezuelan government will yield higher returns as the economy of Venezuela is unstable as compared to the USA and thus it will have greater risk yielding the greater returns.
B:- There will be a higher interest rate on the US government bonds as there is atypical lower interest rates on the bonds issued by the state and local government than the bonds which are issued by the Federal government.
C:- greater interest rates will be earned on the 20-year treasury bond as there is a greater risk involved in the long-term bond than the short-term bonds.
D:- The interest rates of a new recording company will be higher than the Microsoft bond as there is greater security with the Microsoft bonds being a financially stable and a renowned organization.
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