Explain using a graph the relationship between investment and interest rate . show on the graph...
Explain using a graph the relationship between investment and interest rate . show on the graph how expansionary fiscal policy can have a negative impact on the level of investment
Homework Answers
The relationship between Investment and interest rate is
negative, i.e. an increase in interest rate will lower the cost of
borrowing funds, causing the businesses to increase their
investment spending. Also, people would tend to increase their
deposits by saving rather than investing in projects!
Please see attached.
Expansionary fiscal policy would have led to an increase in output
to Y3, but since the process would also lead to increase in the
interest rates, it will end up crowding out investments, which will
cause the economy to move from Y2 to Y3. Thus, investment interest
rate relationship weakens the effect of fiscal policy on
Output.
Add Answer to:
Explain using a graph the relationship between investment and
interest rate . show on the graph...
6) Using money supply-money demand and the interest rate parity relationship, show how the central bank...
6) Using money supply-money demand and the interest rate parity relationship, show how the central bank can maintain fixed exchange rates in the face of changes in output. 7) Using the DD-AA model under fixed exchange rates, show the effects of monetary policy. What are the main results? 8) Using the DD-AA model under fixed exchange rates, show the effects of fiscal policy. What are the main results? 9) Using the DD-AA model under fixed exchange rates, show the effects...
1)Use a graph of the market for loanable funds to show how the severity of crowding...
1)Use a graph of the market for loanable funds to show how the severity of crowding out depends on the slope of the supply curve. 2)Use a graph of the investment demand curve to demonstrate how the severity of crowding out depends on slope of the firm’s demand for investment goods. 3) In a couple of sentences, explain how expansionary fiscal policy can lead to lower rates of long-term economic growth. Please post an original answer and show in graphs...
In the Keynesian model, the difference between using monetary and fiscal policy to eliminate a recession...
In the Keynesian model, the difference between using monetary and fiscal policy to eliminate a recession is that________. an expansionary fiscal policy will leave the economy with a lower real interest rate than an expansionary monetary policy. fiscal policy will eliminate a recession quicker than monetary policy will. monetary policy will eliminate a recession quicker than fiscal policy will. an expansionary monetary policy will leave the economy with a lower real interest rate than an expansionary fiscal policy.
Explain the difference between the interest rate used in an investment and the rate of return...
Explain the difference between the interest rate used in an investment and the rate of return of the investment. What is the relationship between IRR and MARR? When costs equal benefits (during the same time) what is the present value of the investment? Define rate of return analysis List one advantage of rate of return analysis
MTv1 4. Discuss how contractionary monetary policy impacts the equilibrium interest rate using the bond market to motivate the change in the interest rate. Explain using the Bond market graph and...
MTv1 4. Discuss how contractionary monetary policy impacts the equilibrium interest rate using the bond market to motivate the change in the interest rate. Explain using the Bond market graph and the Bond pricing formula. Clearly label the graph Soond Dbond 5. In our Chapter 4 Money Market, the demand for money is given by M-SY (03-i), where $Ys 100 and the supply of money is $20. Find the equilibrium interest rate Show calculation
MTv1 4. Discuss how contractionary monetary...
and the only effective If an economy is in a liquidity trap, then the nominal interest...
and the only effective If an economy is in a liquidity trap, then the nominal interest rate is _ policy that can be used to stimulate the economy is - high and rising; expansionary monetary policy high and rising; expansionary fiscal policy zero or negative; expansionary fiscal policy zero or negative; expansionary monetary policy high and rising; contractionary monetary policy
The crowding-out from expansionary fiscal policy causes real interest rates to (increase/decrease) investment to (decrease/increase) , and...
The crowding-out from expansionary fiscal policy causes real interest rates to (increase/decrease) investment to (decrease/increase) , and aggregate demand to shift (left/right),(decreasing/increasing) the overall impact of expansionary economic policy.
Please answer and explain 4. (5 points) What effect a selling bonds will have on the...
Please answer and explain
4. (5 points) What effect a selling bonds will have on the money market? Explain using bond prices. 5. (7 points) Assume that fiscal policy can be accomplished by changing only one of G and T. the IS-LM framework, suppose the effect on the general equilibrium output is the same between expansionary fiscal policy and expansionary monetary policy. Which one would you expect to have a greater impact on the equilibrium consumption? Explain in words. Hint:...
a) Explain how, i) the interest sensitivity of private spending and ii) marginal propensity to consume, determine the s...
a) Explain how, i) the interest sensitivity of private spending and ii) marginal propensity to consume, determine the slope of an iS curve. b) Suppose the Reserve Bank of Australia (RBA) is concemed about recession and wants to adopt an expansionary monetary policy. Explain, using the IS-LM diagram(s), how the effectiveness of monetary policy in increasing the output level may depend on the interest sensitivity of investment spending
a) Explain how, i) the interest sensitivity of private spending and ii)...
The interest rate (0 Hd Monetary Base (H) There is negative relationship between the interest rate...
The interest rate (0 Hd Monetary Base (H) There is negative relationship between the interest rate and the demand for the Fed money. And an increase in $Y shifts the demand for the Fed money curve to the right. Question 1: Suppose an economy without banks. In this economy the equilibrium in money market is given as follows: M = M = 0.25$Y - 0.20i, where $Y=$10 trillion and the interest rate is positive. a) If the Fed sets the...
6) Using money supply-money demand and the interest rate parity relationship, show how the central bank can maintain fixed exchange rates in the face of changes in output. 7) Using the DD-AA model under fixed exchange rates, show the effects of monetary policy. What are the main results? 8) Using the DD-AA model under fixed exchange rates, show the effects of fiscal policy. What are the main results? 9) Using the DD-AA model under fixed exchange rates, show the effects...
MTv1 4. Discuss how contractionary monetary policy impacts the equilibrium interest rate using the bond market to motivate the change in the interest rate. Explain using the Bond market graph and the Bond pricing formula. Clearly label the graph Soond Dbond 5. In our Chapter 4 Money Market, the demand for money is given by M-SY (03-i), where $Ys 100 and the supply of money is $20. Find the equilibrium interest rate Show calculation
MTv1 4. Discuss how contractionary monetary...
and the only effective If an economy is in a liquidity trap, then the nominal interest rate is _ policy that can be used to stimulate the economy is - high and rising; expansionary monetary policy high and rising; expansionary fiscal policy zero or negative; expansionary fiscal policy zero or negative; expansionary monetary policy high and rising; contractionary monetary policy
Please answer and explain
4. (5 points) What effect a selling bonds will have on the money market? Explain using bond prices. 5. (7 points) Assume that fiscal policy can be accomplished by changing only one of G and T. the IS-LM framework, suppose the effect on the general equilibrium output is the same between expansionary fiscal policy and expansionary monetary policy. Which one would you expect to have a greater impact on the equilibrium consumption? Explain in words. Hint:...
a) Explain how, i) the interest sensitivity of private spending and ii) marginal propensity to consume, determine the slope of an iS curve. b) Suppose the Reserve Bank of Australia (RBA) is concemed about recession and wants to adopt an expansionary monetary policy. Explain, using the IS-LM diagram(s), how the effectiveness of monetary policy in increasing the output level may depend on the interest sensitivity of investment spending
a) Explain how, i) the interest sensitivity of private spending and ii)...
The interest rate (0 Hd Monetary Base (H) There is negative relationship between the interest rate and the demand for the Fed money. And an increase in $Y shifts the demand for the Fed money curve to the right. Question 1: Suppose an economy without banks. In this economy the equilibrium in money market is given as follows: M = M = 0.25$Y - 0.20i, where $Y=$10 trillion and the interest rate is positive. a) If the Fed sets the...
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