1- In macroeconomics, _____ refers to the purchase of new capital. 2- What is the source...

1- In macroeconomics, _____ refers to the purchase of new capital.

2- What is the source of the supply of loanable funds?

3- Stock in Frozen Dreams, an ice cream manufacturer, has a price to earnings ratio of 24. Is this comparatively high or low? What are two explanations for the size of this company’s price to earnings ratio?

Solutions

Expert Solution

1. Macroeconomics explains the broader aspects related to market behavior . The purchase of new capital is considered to be an investment in macroeconomics as it defines the use of saving to use that money to get a return by spending money on capital assets.
2. Loanable funds are supplied by the people who wanted to serve their savings to the borrowers and get interest payment in return on a regular basis such as monthly, quarterly or yearly. Suppliers of loanable funds may include the households, financial institutions or government who provide funds to the businesses to make their operation and business expenses.
3. Price to earning ratio is used to determine the value of a stock for an investor or shareholder as it defines how much an investor can earn from the given share or stock. Here, Stock in Frozen Dreams explains the PE ratio as 24, which is comparatively high. It explains that the size of company's PE ratio is broader and explains that the investors are ready to pay higher for the given stock as investors expect a higher price of the stock in the near future.

Rahul Sunny answered 1 year ago

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