The reason for rising interest rate when money supply falls, banks have less money to lend which create shortage of money in banks so that people can invest. People now have to run more to get loans from the banks which raises the interest rate and vice versa. When money supply falls, interest rate rises and output falls to Y2. When money supply rises, interest rate falls to i1 and output rises to Y1.
The reason for rising interest rate when money demand rise is that there are more number people who needs loans to invest in the market. Whenever there is high money demand, banks raise the interest rate to gain maximum profit and vice versa. When money demand rises/falls, only rate of interest rises/falls. It does not make any impact on level of output.
Respond to the following in a minimum of 175 words: Explain what happens to the interest...
Explain what happens to the interest rate if the money supply increases or decreases and the money demand remains unchanged. Explain what happens to the interest rate if the money demand increases or decreases and the money supply remains unchanged.
1) Explain: Who has control of the money supply in the US Economy? What happens to the interest rate if the money supply increases or decreases and the demand for money remains unchanged? 2) What are the "Tools" of the Federal Reserve? How are they used to increase the money Supply? How are they used to decrease the money supply? When would you use these policies? No less than 150 words each
Respond to the following in a minimum of 175 words: Explain the tax implications of compensation in the form of salary and wages from the perspectives of the employee and employer.
Respond to the following in a minimum of 175 words: The world's population grows each year. Does this mean that the mass of Earth increases each year? How old are atoms? Explain your answer with an example.
Respond to the following in a minimum of 175 words: Explain the following two topics from our course readings and provide an example of each: a: Hypothesis testing b: Regression analysis
Respond to the following in a minimum of 175 words: What is a master budget? What are some of the underlying budgets that form the master budget? What is the budgeting process at your organization? Is it effective? Why or why not?
Respond to the following in a minimum of 175 words: What are the primary internal organizational considerations for the development of a strategic plan? Which consideration is the most important?
Respond to the following in a minimum of 175 words: What is the significance of using graphs in lab reports? Provide an example of a type of graph displaying motion. What are the labels for each axis? What difficulties do you have in creating or reading graphs?
Respond to the following in a minimum of 175 words: What marketing costs can be transferred to a distributor if a manufacturer decides to stop shipping direct to the customer and and use a distributor?
Respond to the following in a minimum of 175 words: Compare the pros and cons of two economic systems.