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Chapter 10: Q3. (page 385)

What do you predict is the effect of Grameen Bank’s lending on a community?

Short Answer

Expert verified

The income of the community members will increase.

Step by step solution

01

Impact of Grameen Bank’s lending on a community

Generally, these communities find it difficult to get financial support from traditional financing institutions of financial risk associated with them (because there have low savings or they fail to provide any collateral). If a person from the community wants to expand his small business, he will fail to get any financial support from these institutions.

Grameen Bank lends money to these members of the small income community. The members can use the borrowed money to initiate small businesses or expand existing businesses. Hence, the income of the members will increase.

Thus, the lending by Grameen Bank will increase the income of the community members.

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Most popular questions from this chapter

What is the likely effect of each of the following events on the stock price of a company? Explain your answers.

  1. The company announces that although profits are low this year, it has discovered a new line of business that will generate high profits next year.
  2. The company announces that although it had high profits this year, those profits will be less than had been previously announced.
  3. Other companies in the same industry announce that sales are unexpectedly slow this year.
  4. The company announces that it is on track to meet its previously forecast profit target.

Explain what is wrong with the following statement: “Savings and investment spending may not be equal in the economy as a whole because when the interest rate rises, households will want to save more money than businesses will want to invest.”

Suppose that expected inflation rises from 3% to 6%.

  1. How will the real interest rate be affected by this change?
  2. How will the nominal interest rate be affected by this change?
  3. What will happen to the equilibrium quantity of loanable funds?

Use a diagram of the loanable funds market to illustrate the effect of the following events on the equilibrium interest rate and investment spending. a. An economy is opened to international movements of capital, and a net capital inflow occurs.

b. Retired people generally save less than working people at any interest rate. The proportion of retired people in the population goes up.

Assess the following statement: "Although many investors may be irrational, it is unlikely that over time they will behave irrationally in exactly the same way—such as always buying stocks the day after the Dow has risen by 1%."
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