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QUESTION 2 (15 marks) Explain each of the following: (a) real balance effect, (b) interest rate...
questions one and two 1. The interest rate effect, the real balance effect, and the foreign...
questions one and two
1. The interest rate effect, the real balance effect, and the foreign purchases effect suggest that the aggregate demand curve is downward sloping. True or false. A. True B. False 2. As the price level decreases, interest rates fall. Lower interest rates lead to increased household consumption. This is called the interest rate effect. True or false. A. True B. False
The Fisher effect says that the real rate of interest is independent of the ---14---. For...
The Fisher effect says that the real rate of interest is independent of the ---14---. For 15), explain what that means using a numerical example.
Figure 13-2 Real Interest Rate Supply of Loarable Funds World interest rate, o Derrand for Loanable...
Figure 13-2 Real Interest Rate Supply of Loarable Funds World interest rate, o Derrand for Loanable Funds Quantity of Loanable Funds Real Exchange Rate Supply of Canadian Dollars (5-1) Quantity of Dollars Refer to the Figure 13-2. If the interest rate was initially at ro and an import quota was imposed, what would happen to the real interest rate? It would decrease because demand would shift left. It would decrease because supply would shift right. It would not change because...
Question 43 5 pts If the Money Supply (M) is $10 billion, real GDP (Q) is...
Question 43 5 pts If the Money Supply (M) is $10 billion, real GDP (Q) is $20 billion, and the Price Level (P) is 2.0, then the velocity of money (V) is: 2. 40. 20. 4. --------------------------- Question 44 5 pts Which of the following does NOT explain the downward slope of the aggregate demand curve? The real balance (wealth) effect The multiplier effect The international trade effect The interest rate effect Question 45 5 pts An increase in household...
According to the Fischer Effect, which of the following are true? the real interest rate and...
According to the Fischer Effect, which of the following are true? the real interest rate and the rate of inflation are equal. the change in the rate of inflation and the change in the real interest rate a equal the change in the real interest rate and the change in the nominal interest are equal. the real interest rate remains unchanged. the real interest rate and the nominal interest rate are equal.
(i) Explain the concept of a 'Real Rate of Interest. How does the real rate of...
(i) Explain the concept of a 'Real Rate of Interest. How does the real rate of interest differ from the notional interest rate charged against (or received) by consumers of financial products? Explain the 'real rate of interest' principle using the example of a client who has $100,000 of their money invested in an 'at call, bank account which is currently paying 0.5% per annum. (8 marks)
1) If the substitution effect of the real interest rate on saving is smaller than the...
1) If the substitution effect of the real interest rate on saving is smaller than the income effect of the real interest rate on saving, then a rise in the real interest rate leads to a in consumption and a_ _in saving, for someone who's a lender (saver). A) fall; fall B) fall; rise C) rise; fall D) rise, rise 2) For a borrower, an increase in the real interest rate will lead to A) higher current consumption and less...
1: what would happen to national saving, investment, trade balance interest rate, and real exchange rate...
1: what would happen to national saving, investment, trade balance interest rate, and real exchange rate in responding to an increase in tariff on imported cars by the domestic government? graphically explain with the help of large open economy 2: what do you mean by trade policies? it's argued that protectionist trade policy benefits only local producers whereas society on the average suffers from it, do you agree with the statement? graphically explain considering a model of small open economy?
Question 2 (20 marks) a) Show graphically and explain the effect of a decrease in the...
Question 2 (20 marks) a) Show graphically and explain the effect of a decrease in the population growth rate on the steady state capital to labour ratio in the Solow’s neoclassical growth model. (20 marks) b) Show graphically and explain the effects of the steady state of an increase in the quantity of land in the Malthusian growth model. (20 marks)
4. What is the value of the real interest rate in each of the following situations?...
4. What is the value of the real interest rate in each of the following situations? a. The nominal interest rate is 15%, and the expected inflation rate is 13%. b. The nominal interest rate is 12%, and the expected inflation rate is 9%. c. The nominal interest rate is 10%, and the expected inflation rate is 9%. d. The nominal interest rate is 5%, and the expected inflation rate is 1%. e. In which of the above situations would...
questions one and two
1. The interest rate effect, the real balance effect, and the foreign purchases effect suggest that the aggregate demand curve is downward sloping. True or false. A. True B. False 2. As the price level decreases, interest rates fall. Lower interest rates lead to increased household consumption. This is called the interest rate effect. True or false. A. True B. False
Figure 13-2 Real Interest Rate Supply of Loarable Funds World interest rate, o Derrand for Loanable Funds Quantity of Loanable Funds Real Exchange Rate Supply of Canadian Dollars (5-1) Quantity of Dollars Refer to the Figure 13-2. If the interest rate was initially at ro and an import quota was imposed, what would happen to the real interest rate? It would decrease because demand would shift left. It would decrease because supply would shift right. It would not change because...
According to the Fischer Effect, which of the following are true? the real interest rate and the rate of inflation are equal. the change in the rate of inflation and the change in the real interest rate a equal the change in the real interest rate and the change in the nominal interest are equal. the real interest rate remains unchanged. the real interest rate and the nominal interest rate are equal.
(i) Explain the concept of a 'Real Rate of Interest. How does the real rate of interest differ from the notional interest rate charged against (or received) by consumers of financial products? Explain the 'real rate of interest' principle using the example of a client who has $100,000 of their money invested in an 'at call, bank account which is currently paying 0.5% per annum. (8 marks)
1) If the substitution effect of the real interest rate on saving is smaller than the income effect of the real interest rate on saving, then a rise in the real interest rate leads to a in consumption and a_ _in saving, for someone who's a lender (saver). A) fall; fall B) fall; rise C) rise; fall D) rise, rise 2) For a borrower, an increase in the real interest rate will lead to A) higher current consumption and less...
Question 2 (20 marks) a) Show graphically and explain the effect of a decrease in the population growth rate on the steady state capital to labour ratio in the Solow’s neoclassical growth model. (20 marks) b) Show graphically and explain the effects of the steady state of an increase in the quantity of land in the Malthusian growth model. (20 marks)
4. What is the value of the real interest rate in each of the following situations? a. The nominal interest rate is 15%, and the expected inflation rate is 13%. b. The nominal interest rate is 12%, and the expected inflation rate is 9%. c. The nominal interest rate is 10%, and the expected inflation rate is 9%. d. The nominal interest rate is 5%, and the expected inflation rate is 1%. e. In which of the above situations would...
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