8. Using an appropriate diagram, explain how the equilibrium interest rate is determined in the economy. If the central bank wants to reduce the equilibrium interest rate, what should they do? Illustrate this in the same diagram you have drawn earlier.
Q: 4. Show on a diagram how an individual may seek to smooth their consumption over their lifetime. How…
A: The life cycle Hypothesis explains the individual's smooth consumption over a period of a lifetime.…
Q: Suppose that the government decides to increase government expenditure. a) Is this a fiscal or a…
A: In any economy, there are two types of policies to influence the output. One policy is monetary…
Q: Due to recent pandemic in country A, the economic activity in this country has decreased…
A: Answer a) When the government of Canada borrows $35 billion then we have to show its impact on the…
Q: Exhibit 4 Interest Rate Amount of Money Demanded Asset $20 40 60 80 100 as an 10% 4 4. Refer to…
A: The nominal GDP of a nation is calculated using existing prices and is not adjusted for inflation.…
Q: Suppose that an increase in consumer confidence raises consumers' expectations about their future…
A: The relationship between the level of disposable income and consumption depicts the function of…
Q: Assume the Bank of Canada conducts an open market purchase, which increases real GDP. What happens…
A: The central bank practice of purchasing and selling treasury securities, as well as other assets, on…
Q: Q. 18 Dave deposits $2000 into the bank as deposits in 2016. The bank promises him a nominal…
A: Deposited - $2000 Nominal Interest rate = 5% = 0.05 Goods: 2 can of Coca-Cola 5 hamburgers
Q: Referring to the two figures, which of the following sequences (numbered arrows) shows the logic of…
A: Interest rate is usually controlled by the central bank of a country. The central bank fixes the…
Q: Answer the question based on the following information: For transactions, households and businesses…
A: The money supply is the total amount of money held by the public at a particular point in time.…
Q: 3) If government spending increases at the same time the money supply increases, what effect will…
A: Note: We will answer the first question as the exact one was not specified. Please resubmit a new…
Q: Assume you are an economist at Reserve Bank of Vanuatu. The government has been considering tax…
A: Change in tax influences the interest rate, savings and volume of investment. That is, if government…
Q: The following equations describe an economy. Y = C + I + G. C = 120 + 0.5( Y - T ). I = 100 -…
A: The IS-LM model is used to determine the equilibrium interest rate and income level in the economy.…
Q: Assume the following model of the economy: Y = C + I + G C = 120 + 0.5(Y - T) I = 100 - 10r G =…
A: IS curve is given by the equation: Y = C + I + G LM curve is given by the equation: MPd = MPs =MP To…
Q: 7. Suppose that the Bank of Canada increases the Bank Rate from 0.25 to 7 percent. Which of the…
A: Answer in step 2. Note: please post second question seperately Thankyou ?
Q: 15- The IS curve shows the combinations of output and the real interest rate for which the goods…
A: The IS curve is derived from the goods market. It shows the relationship between the interest rate…
Q: 1. Does Real Consumption depend on Nominal or Real interest rates? Why?
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: For the next two questions, assume that national income (Y) increases from 200 to 400, all else the…
A: Answer-
Q: Explain, with the aid of a graph, the effect of an interest rate decrease on the (7) money market…
A: Money market consists of demand for money and money supply. Intersection of these two curves gives…
Q: Answer the question based on the following information: For transactions, households and businesses…
A:
Q: true/false explain 4. When nominal interest rates are zero, the central bank can still lower them…
A: The nominal interest is the interest rate which does not take inflation into account in the economy.…
Q: Canvas Question 3 Determine the equilibrium income and interest rate given the following information…
A: Given: C=0.8Y+100 I=-20r+1000 MS=2375 L1=0.1Y L2=-25r+2000
Q: 11. A closed economy has the following parameters and functions that describe its components: •…
A: Since you have posted multiple question, we will solve first question only.
Q: Some forecasters see a bright upcoming year as tax cuts will take effect and interest rates remain…
A: The economies around the globe are involved in activities in order to enhance the level of their…
Q: (1) Suppose there are more borrowers than lenders in the economy.what is the aggregate effect Of…
A: If the borrowers are more than lenders in the economy then the demand for funds is higher in an…
Q: 3) Imagine the effects of a decline in the value of financial assets, such as stocks, on consumption…
A: The decline in the value of financial assets means that there will be a wealth effect on consumers.…
Q: _____________________The Federal Reserve, the central bank of the United States, has been cutting…
A: Monetary policy refers to the policies adopted by the central bank to interfere in the economy and…
Q: In the economy, if the Central Bank rediscount rate, in this case, equality in the economy How will…
A: As central bank of any economy rediscounts rate the income of the economy changes effecting the…
Q: please answer the questions: 1. Solve for equilibrium nominal interest rate (i) 2. Suppose the…
A: Answer - 1 Answer - Given in the question - MD = $Y.L(i) ......................(1) MS = M…
Q: 3. The money supply, the loanable funds market, and interest rates Changes in the money supply…
A: In financial matters, the loanable assets regulation is a hypothesis of the market loan cost. As…
Q: Suppose that the money market in a hypothetical economy is given by the diagram at right. Currently,…
A: Given, Interest rate = 15%
Q: xplain, with the aid of the goods-market-equilibrium diagram, how a decrease in government purchases…
A: The goods market is represented by the IS curve and the money market is represented by the LM curve.…
Q: 8. Given the following information: C = Ca + 0.8Yd Ip = 1900 - 40r G = 1800 NX = 700 - 0.14Y T= 200…
A:
Q: 9.) An economy is in long-run macroeconomic equilibrium with an unemployment rate of 5% when the…
A: Macroeconomic Equilibrium - At the intersection of the AD and AS curves, macroeconomic equilibrium…
Q: Answer the question based on the following information: For transactions, households and businesses…
A: Given: Total Money supply = $230 Nominal GDP=$300 To find: Equilibrium interest rate
Q: If the investment curve was horizontal and the prices increased? Explain what will happen to…
A: The AD curve shows an inverse relationship between the level of national income and the aggregate…
Q: 4) In a money market equilibrium diagram, show the effect of an increase in real money demand, i.e.,…
A: When talking about money market equilibrium, it can be said that money supply curve is vertical as…
Q: Identify the effect of recession in the economy on either demand or supply curve and the…
A: What is a recession? Recession is a term utilized to signify a slowdown in general economic…
Q: Let's conSider the effects of ah introduction of the ATM machines (back in the 1980s). Imagine that…
A: *Hi there , as you have posted multiple sub parts . As per our guidelines we can only first 3 sub…
Q: 14. Today many Central Banks around the World are thinking of increasing interest rates. Why? What…
A: Note: We will answer the first question as the exact one was not specified. Please resubmit the…
Q: Assume that the economy begins in long run equilibrium and the central bank increases the target…
A: There is inverse relationship between the rate of interest and investment. Higher the interest rate…
8. Using an appropriate diagram, explain how the equilibrium interest rate is determined in the economy. If the central bank wants to reduce the equilibrium interest rate, what should they do? Illustrate this in the same diagram you have drawn earlier.
Step by step
Solved in 2 steps with 1 images
- If the investment curve was horizontal and the prices increased? Explain what will happen to interest rate and quantity of money? Using graph.(1) Suppose there are more borrowers than lenders in the economy.what is the aggregate effect Of a decrease in the interest rate on C,C"and S ?Assistance with the following a. Consider an economy described by the following equations: Calculate and use a diagram to demonstrate the equilibrium interest rate Y=C + I +G Y=7,000 G=4000 T=2,000 C=150+0.75((Y-T) I=1,000-50r b. If G increased by a 1000 using a diagram please explain and calculate the new equilibrium interest rates.
- The table below shows the amount of savings and borrowing in a market for loans to purchase homes, measured in millions of dollars, at various interest rates. InterestRate QuantitySupplied QuantityDemanded5% 98 2216% 129 1917% 160 1608% 178 1429% 196 12410% 214 106 What is the equilibrium interest rate and quantity of loaned funds? r = % Q = Suppose there is a decrease in demand of money, what will happen to interest rates and quantity? Increase in Interest Rates, Increase in Quantity?Increase in Interest Rates, Decrease in Quantity?Decrease in Interest Rates, Increase in Quantity?Decrease in Interest Rates, Decrease in Quantity?In the economy, if the Central Bank rediscount rate, in this case, equality in the economy How will interest and national income change? Draw a graph and explain. Answer this question according to the following three conditions. A) The situation where the interest rate elasticity of the investment is low B) The situation where the interest rate elasticity of the investment is high C) The situation where the interest elasticity of the investment is zeroYou have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible. 4. What happens to the interest rate?A. increaseB. decreaseC. remains unchanged 5. What happens to the aggregate Demand curve?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged What is the effect on the foreign exchangemarket (the $ market)? 6. Demand?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged 7. Supply?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged
- 6. What factors determine the real rate of interest? If the money supply is increased, what happens to the level of interest rates?The following equations describe an economy. Y = C + I + G. C = 120 + 0.5( Y - T ). I = 100 - 10r. G = 50. T = 40. ( M/ P) d = Y - 20r. M = 600. P = 2. What are the equilibrium level of income and the equilibrium interest rate? If the government increases government spending by 45, what will be the new equilibrium level of income and equilibrium interest rate?Show on the graph how each of the following events changes the equilibrium interest rate by shifting the relevant curve(s). a. The president signs a tax cut into law. b. An engineering advance induces many firms to upgrade their computer systems. c. Congress repeals an investment tax credit and uses the revenue to reduce other taxes. d. A flu pandemic induces consumers to stay at home rather than go shopping. Interest rate Interest rate Interest rate 10 8 2 11 10 8 7 11 10: 2 11 D 100 200 10 D 100 200 300 400 500 600 Lounable funds 700 S D 800 900 1,000 S D 300 400 500 600 700 800 900 1,000 Loanable funds S D D 100 200 300 400 500 600 700 800 900 1,000 Loanable funds S
- Kefer to the following graph to answer the question that follow. Interest rate Line 1 6% 5% Line 2 $300 Savings and investment (billions of dollars) In the figure, at an interest rate of 4%, the: $200 quantity demanded of loanable funds equals the quantity supplied of loanable funds, and equilibrium is reached. quantity demanded of loanable funds is greater than the quantity supplied of loanable funds, and there is a surplus of loanable funds. demand for loanable funds is greater than the supply of loanable funds, and there is a shortage of loanable funds: quantity demanded of loanable funds is greater than the quantity supplied ofConsider an economy described by the following equations:Y=C + I +GY=7,000G=4000T=2,000C=150+0.75(Y-T)I=1,000-50rb. Calculate the equilibrium interest rate. c. Now suppose the G rises by 1,000. Compute private saving, public saving, andnational saving.d. Calculate the new equilibrium interest rate.For these 3 questions please only show the graphical response.14. An economy is initially described by the following equations: C=400+ 0.85(Y-T). I = 1000 - 40 r. (M/P)d = Y - 100r. G = 1,000. T = 1,200. M = 10,000. P = 4. a. Derive and graph the IS curve and the LM curve. Calculate the equilibrium interest rate and level of income. Label that point A on your graph. Suppose that a newly elected president cuts taxes by 25 percent. Assuming the money supply is held constant, what are the new equilibrium interest rate and level of income? What is the tax multiplier? Show your work. b. c. Now assume that the central bank adjusts the money supply to hold the interest rate constant. What is the new level of income? What must the new money supply be? What is the tax multiplier? Show your work. d. Now assume that the central bank adjusts the money supply to hold the level of income constant. What is the new equilibrium interest rate? What must the money supply be? What is the tax multiplier? Show your work. e. Show the equilibria you calculated in parts…