5 Questons

1 Long-run real interest rates are expected to increase. An accountant and Economist were interviewed regarding the effect of this increase. Keeping all else constant, their answer would likely differ. How do you guess the interviewed will answer? Does the difference in response matters? If yes, why? If not, why not? Normally, accountants are interested in analyzing such is situations by taking into consideration nominal interest rates and explicit costs. Accountants consider the face value of interest payments and the dollar amounts involved in financial transactions (Keat et al., 2007). For instance, if an interest rate is 7%, the accountant would consider the actual 7% payment without considering rates adjusted for inflation. On the contrary, an economist would be interested in real interest rates, which are nominal rates adjusted for inflation (Keat et al., 2007). These nominal rates are a true reflection of the cost of borrowing. The difference in the responses by the accountant and economist matters. The varied perspectives that the economist and accountant have can be instrumental in influencing decision-making. The perspectives of accountants can be vital in influencing short-term decisions while economists provide a long-term view on economic consequences and policy implications. 2 Many cities have experienced a substantial decrease in the amount of garbage being collected after they changed from levying a flat tax on each household to a system where the homeowner is charged a fee for each bag or can picked up. Would this have been the result of a change in demand or a change in the quantity demanded? Would you recommend the flat fee or the fee per bag? Why? This would likely be the result of a change in quantity demanded than a change in demand. The switch from a flat to a fee per bag likely caused consumers to be more conscious of the amount of garbage they produce and dispose of leading to a decrease in the quantity demanded. In addition, a flat fee would help to encourage responsible behavior when it comes to hand...