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(Note: there were similar questions in the past, but I did not see an exact match.) As used in this question, “interest rates” are the rate of interest associated with a policy rate or a deposit. A “yield” is the the rate of return on a bond given its purchase price. For a bond, since the payments are fixed, the yield moves inversely with price. If we ...


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Interest payments are contractual payments. They need to be specified with an exact formula. For a given set of cash flows, one could come up with a multitude of formulae that end up giving the same values. In order to make interest rates comparable, laws, regulations, and market conventions specify that different conventions be used. Of these conventions, ...


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The potential risk of borrowing too much now is that interest rates will be higher when the debt has to be rolled over. Even though it is completely correct to say that most government securities have fixed interest rate, most of these securities are not perpetual, meaning they expire at some point. For example, as mentioned on the UK Debt Management Office ...


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The question appears to refer to what is normally called the coupon rate (but the US Treasury does call the interest rate in its documentation). This is different than the yield, which is determined by a 1:1 function of price. Issuance conventions vary across markets. I will just use the U.S. Treasury as an example. Firstly, this only applies to new bonds/...


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In your setup, you mention the "initial amount of money." But I think you mean the amount of income. Anyway, people's income are the sum of wages + profits. So: Expenditures (spending on goods and services) equals Income (wages and profits earned by selling the goods and services). Note: I'm assuming equilibrium (i.e. no unwanted inventory changes),...


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This is not really a riddle. First, amount of money in economy is not constant. The amount of money economy has access to is typically growing thanks to policy of central bank/government. For example, you can see from Fred data that amount of money in the US measured by $M2$ increases over time (you can check similar statistics for almost any other country ...


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As you already mentioned this equation can be derived from the households consumption rule. the equation is derived based on consumption C rather than income Y, by considering the marginal utility of comsuming right now vs saving and delaying consumption. Investment/net export is not a part of this model, so C=Y So lets take a look at the Euler condition ...


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