In: Economics
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?
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.