Does this discovery mean that we should define money as equal to total amount of debt in economy?… 1 answer below »

Homework 1 – ECO315-810
Suppose a researcher discovers that a measure of the total amount of debt in the U.S. economy over the past twenty years was a better predictor of inflation and the business cycle than M1 or M2. Does this discovery mean that we should define money as equal to the total amount of debt in the economy?
Explain how cigarettes could be called “money” in prisoner-of-war camps of World War II.
Why are most of the U.S. dollars held outside of the United States?
If the interest rate is 5%, what is the present value of a security that pays you $1, 050 next year and $1,102.50 two years from now? If this security sold for $2200, is the yield to maturity greater or less than 5%? Why?
If there is a decline in interest rates, which would you rather be holding, long-term bonds or short-term bonds? Why?
You have just been given the following advice. “Long-term bonds are currently a bad investment because their interest rate is only 4%.” Assess.

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Homework 1 – ECO315-810

Suppose a researcher discovers that a measure of the total amount of debt in the U.S. economy over the past twenty years was a better predictor of inflation and the business cycle than M1 or M2. Does this discovery mean that we should define money as equal to the total amount of debt in the economy?

Explain how cigarettes could be called “money” in prisoner-of-war camps of World War II.

Why are most of the U.S. dollars held outside of the United States?

If the interest rate is 5%, what is the present value of a security that pays you $1, 050 next year and $1,102.50 two years from now? If this security sold for $2200, is the yield to maturity greater or less than 5%? Why?

If there is a decline in interest rates, which would you rather be holding, long-term bonds or short-term bonds? Why?

You have just been given the following advice. “Long-term bonds are currently a bad investment because their interest rate is only 4%.” Assess.

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