In January of 2019 , Sweden announced that it would increase its sale of government bonds from 55 billion krone to 85 billion krone. This resulted in (an increase, decrease, no change, an ambiguous change) in the price of government bonds and (an increase, decrease, no change, an ambiguous change) in the yield of government bonds.
Q: Which of the following best describes the effect of the zero interest rate policy implemented in…
A: Zero bound rates of interest suppositions have been overturned as of late in recent years. In…
Q: In the Classical model, an decrease in savings would result in Multiple Choice A rise in interest…
A: According to classical economics, saving was a rising function of the rate of interest. The…
Q: When nominal interest rates on financial assets are low, the opportunity cost of holding money is…
A: When nominal interest rates on financial assets are low, the opportunity cost of holding money is…
Q: The neutral interest rate is the rate at which: Group of answer choices macroeconomic equilibrium…
A: Interest rate is the rate at which people make an exchange of monetary instruments at the…
Q: Which of the following would not cause shift in the investment demand curve as the above graph…
A: The investment demand curve is downward sloping. It shows the relationship between investment by…
Q: If firms are less optimistic that future profits will rise and remain strong for the next few years,…
A: Answer to the question is as follows :
Q: When the price level falls Answer households want to lend more, so the interest rate rises making…
A: When the price level falls, inflation also falls. Since the real rate of interest varies inversely…
Q: If interest rates increase in financial markets, then... Group of answer choices Eli’s trucking…
A: Interest rates in the proportion of the total amount that a borrower pays to the lender for…
Q: Question #4. Individual income taxes directly affect personal disposable incomes which in turn…
A: The IS and LM curve shows the relation b/w interest rate(i) and output(o/p), where goods and money…
Q: Assume that the housing market is in equilibriIum in year 1. In year 2, the mortgage rate that banks…
A: As economies emerged, goods and services were produced that required machinery and labour. With time…
Q: Which of these are characteristics of the economy that led to the Crash of 1929? New roads and…
A: These are characteristics of the economy that led to the Crash of 1929. More companies offer…
Q: If real interest rates become negative, the neoclassical model of investment predicts there is now…
A: Neoclassical theory of investment: The theory is based on the neoclassical optimal capital…
Q: weighted average TT/US dollar selling rate depreciated marginally by 0.05 percent to US$1 =…
A: Supply and demand , relationship between the amount of an item that makers have ready to move and…
Q: Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks…
A: Mortgage loan: It refers to the loan which is given by the banks to the people for purchasing…
Q: . Employment b. Laying off c. Maturity of Investment d. Promotion
A: There are many cases where spending will increase. Spending is dependent on several factors such as…
Q: To concede that there is a minimum level which interest rates cannot fall below is a notion brought…
A: The Zero Lower Bound theory, is a theory which says that the nominal interest rates cannot fall…
Q: When consumers and businesses have greater confidence that they will be able to repay loans in the…
A: The rate of interest is the main reason that determines the quantity of savings and investment in…
Q: A decrease in the price level leads to greater real wealth and more savings, which reduces the…
A: Wealth effect:- The wealth effect investigates ways personal fortune influences customer purchasing…
Q: ndicate whether each view follows the traditional (neoclassical) view of money, banking, and…
A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…
Q: The level of a country’s private investment tends to be very volatile because… Select one: a.…
A: Aggregate demand = consumption + Gross investments + government spending + Net exports Private…
Q: Choose the correct match of each of the following economic concepts: A Positively slopped line…
A: Marginal propensity to consume : The MPC is the portion of each extra unit of a household's income…
Q: According to our analysis of a worker's choice of how much to save for retirement using our model of…
A: Answer:- (D) An increase in the interest rate.
Q: COURSE: MACROECONOMICS - IS-LM MODEL Demonstrate under the assumptions of the IS-LM model the…
A: Investment Savings (IS) and Liquidity Preference-Money Supply (LM) are the two components of the…
Q: Some form of financial distress can become a full-blown recession if risk lead to ____ interest…
A: Recession is a period significant decline in economic activity. It is characterized by decline in…
Q: Interest rates adjusted for the effects of inflation are real variables, inflation is a nominal…
A: Any nominal variable adjusted for the effects of inflation is called a real variable.
Q: Other things the same, when the price level rises more than expected, some firms will have higher…
A: Whenever there is an increase in the price level producers try to sell more of a product to earn a…
Q: Higher potential output levels without any monetary policy intervention will lead to Multiple…
A: Given - Higher potential output levels without any monetary policy intervention.
Q: Now, suppose that Mexico experiences a sudden bout of political turmoil, which causes world…
A: The equilibrium interest rate in an economy is determined by the demand and supply of loanable…
Q: The classical dichotomy refers to the separation of a. decisions made by the public and decisions…
A: Classical dichotomy- Independence of real variable from an alteration in the money supply and…
Q: Bank Indonesia has also conducted a quantitative easing policy to inject liquidity in the economy,…
A: The equilibrium in an economy is determined by the market forces of aggregate demand and aggregate…
Q: Changes in interest rates, ceteris paribus, cause a shift in A) the investment demand curve…
A: Aggregate demand is the quantity that is demanded by all the consumers that exists in the market.…
Q: Consider a household with wealth of $62,000. If the price level decreases by 8%, this household is…
A: Aggregate demand is downward sloping showing inverse relationship between price and real output…
Q: Inflation and Interest Rates) Using a demand-supply diagram for loanable funds, show what happens to…
A: There is an inverse relationship between the real interest rate and expected inflation rate. So, if…
Q: Increase in interest rates causes the supply curve to shift. Monetary expansion causes a decrease in…
A: In the loanable funds market, money supply implies the availability of money to lend and money…
Q: Given the expected relationship between the real interest rate and investment, how would you explain…
A: Real interest rate: - The real interest rate is the inflation-adjusted interest rate. Real interest…
Q: What is the diference between a real interest rate and a nominal interest rate?What is the intuition…
A: An interest rate is a rate at which a borrower (the debtor) pays interest for the use of cash…
Q: What other factors besides interest rates will cause the investment demand curve to shift?
A: Investment demand has an inverse relationship with the interest rate. There are other factors also…
Q: When interest rates increase, we expect the supply curve for large durable goods to shift upwards.…
A:
Q: In the years leading up to the financial crisis of 2008–2009, the market for housing can be best…
A: Recession is a temporary period of economic decline which leads to a fall in GDP for two successive…
Q: Other things the same, when the price level rises more than expected, some firms will have
A: Price level refers to the current prices for services and goods produced in an economy.
In January of 2019 , Sweden announced that it would increase its sale of government bonds from 55 billion krone to 85 billion krone. This resulted in (an increase, decrease, no change, an ambiguous change) in the price of government bonds and (an increase, decrease, no change, an ambiguous change) in the yield of government bonds.
Step by step
Solved in 2 steps
- Problem Set 4: Saving and Investment Economists in Fantasialand, a closed economy, have collected the following information about the economy for a particular year: Y = 9000; C = 6000; T = 1500; G = 1700. The economists also estimate that the investment function is: I = 3300 - 100r, where r is the country’s real interest rate, expressed as a percentage (i.e. r = 1 means interest rate is one percent). Calculate private saving, public saving, national saving, investment, and the equilibrium real interest rate.Economists in Funlandia, which has a closed economy, have collected the following information about the economy for a particular year: YY = = 10,00010,000 CC = = 6,0006,000 TT = = 1,5001,500 GG = = 1,7001,700 The economists also estimate that the investment function is: II = = 3,300−100r3,300−100r where rr is the country’s real interest rate, expressed as a percentage. Complete the following table by calculating private saving, public saving, national saving, investment, and the equilibrium real interest rate. Component Amount Private Saving Public Saving National Saving Investment Equilibrium Real Interest RateDemand Supply Supply Demand LOANABLE FUNDS (Billions of dollars) Scenario 1: Individual Retirement Accounts (IRAS) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Now suppose there is an increase in the maximum contribution, from $5,000 to $8,000 per year. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending to Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government repeals a previously existing investment tax credit. Shift the appropriate curve on the graph to reflect this change. The repeal of the previously existing tax credit causes the interest rate to and the level of investment to Scenario 3: Initially, the government's…
- 5. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) INTEREST RATE (Percent) I Demand LOANABLE FUNDS (Billions of dollars) Supply Demand Supply *Selim has no income in period 1 (consumption now) and an income of 1800Ł in period 2 (consumption later). The current interest rate is 20% (r=0.2) on consumer loans. Based on this information, answer the following questions a. What is the maximum amount that Selim can borrow to spend in period 1? Explain your answer. Can he spend 600 in period 2 and borrow 1000 in period 1?Economists in Funlandia, a closed economy, have collected the following information about the economy for a particular year: Y = 10,000 C = 6,000 T = 1,500 G = 1,700 The economists also estimate that the investment function is: I = 3,300 – 100 r, where r is the country’s real interest rate, expressed as a percentage. Calculate private savings?
- 5. The market for loanable funds and government policy The following graph shows the loanable funds market. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Consider each scenario separately by returning the graph to its starting position when moving from one scenario to the next. (Note: You will not be graded on any changes you make to the graph.) INTEREST RATE (Percent) Supply Demand LOANABLE FUNDS (Billions of dollars) Demand Supply ?How will planned investment spending change as the following events occur? a) The interest rate falls as a result of Federal Reserve policy. b) The U.S. Environmental Protection Agency decrees that corporation must upgrade or replace their machinery in order to reduce their emissions of sulfur dioxide. c) Baby boomers begin to retire in large number and reduce their savings, resulting in higher interest rates. Thank you very much for your help.Derive analytically and graphically the solution of the income-expenditure model, with only households and firms, by focusing on the equilibrium in the bonds' market. What is the effect on saving (S) generated by an increase in the marginal propensity to save (s)? Explain.
- After staying virtually flat for about a year and a half, the average lending rate of banks has started to show signs of decline in April after the Bank of Ghana reduced the monetary policy rate the month before. The Summary of Economic and Financial Data (May 2020) published by the Bank of Ghana has shown that average lending rate has finally moved out of its comfort zone to a step downward. Prior to recording 22.38 percent in April, the average lending rate has since the past 17 months (December 2018) not come below 23%.How would banks benefit when interest rates decrease?Assuming you are the Minister of Finance and Economic Planning for Nigeria, in charge of Fiscal Policy. The Research Director of the Ministry brought you the following data on Nigeria’s for the previous fiscal year, 2021. An examination of the data reveals that, during the fiscal year 2021, households in Nigeria saved 20% of their disposable income (Yd) and spent the rest on consumption. In addition, ₦5,000.00 was spent on Consumption expenditure (C), which is independent of income and Gross Private Investment (I) was ₦ 7,000.00. Total Government expenditure (G) which stood at ₦8,000.00 was supposed to be financed by a lump sum tax of ₦2,000.00 (independent of income) and a proportional tax rate of 25% of national income. Exports (X) stood at ₦2,500.00. In addition, the country’s import (M) during the previous fiscal year comprises of ₦1,000.00 which was independent of the country’s national income and 10% which was dependent of the country’s national income. Given these data on…Assume that GDP (Y) is 6,000. Consumption (C) is given by the equation C= 600+ 0.6(Y- T). Investment (I) is given by the equation I= 2,000 – 100r, where r is the real rate of interest in percent. Taxes (T) are 500 and government spending (G) is also 500. What are the equilibrium values of C, I, and r? What are the values of private saving, public saving, and national saving?
