Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
7th Edition
ISBN: 9780134472669
Author: Blanchard
Publisher: PEARSON
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Chapter 4, Problem 6QAP
To determine
To ascertain the negative relationship between the interest rates and
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Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
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- EXERCISE 10.9 LIMITS ON LENDING Many countries have policies that limit how much interest a moneylender can charge on a loan. Do you think these limits are a good idea? Who benefits from the laws and who loses? What are likely to be the long-term effects of such laws? Tips: For Question 2, you may think about how a low interest rate would affect the poor and those who owe huge debts. For Question 3, you may think about how it would affect the profitability of the banking sector and the supply of lending (will lenders be encouraged to lend more?), and what implications it may have for "credit rationing" (being credit constrained).arrow_forwardHow the following events affect interest rates? Be clear in your answer. 1. An earthquake destroys bridges and roads in Turkey, leading to increased investment spending for rebuilding the infrastructure. 2. Future taxes of businesses are expected to be increased. 3. Corona pandemic is forcing people to stay home to protect themselves and spend less money than usual. 4. The government proposes a new tax on savings.arrow_forwardwhat happens if consumers expect future interest rates to fall?arrow_forward
- Raphael observes that at the current level of interest ratesthere is an excess supply of bonds, and therefore he anticipates an increase in the price of bonds. Is Raphael correct?arrow_forwardIf the government wants to increase the amount of savings in the economy, how should it alter government spending? What effect will this action have on the interest rate in the economy?arrow_forwardThe supply curve in the graph represents the money supply, whereas the demand curve represents money demand. The value of money on the graph represents I/P, where P is the price level. Use the graph to answer the question. Suppose that the government decided to print money. Show what happens on the graph by moving the corresponding curve or curves. Value of money 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 0 1 2 Supply 3 4 5 6 Quantity of money 7 8 Demand 9 10 What happens to the price level when the government increases the money supply in the graph? not enough information to determine decreases increases no changearrow_forward
- Economics Suppose that there is excess supply of money at the current interest rate. During the adjustment process: a. interest rates will rise and bond prices will fall b. interest rates and bond prices will both rise c. interest rates and bond prices will both fall d. interest rates will fall and bond prices will rise Explain it correctlyarrow_forwardYou got a birthday gift cars valued at $40.00 which lets you choose to spend on food delivery fees. You pay $ 15.50 on app that lets you get deliveries for 98 cents each. A) find the formula that gives the value of the card as a function of how many deliveries you have had. B) how many deliveries can you get before your birthday money is usedarrow_forwardWhen the interest rate falls, how does the opportunity cost of holding money and the quantity of money demanded change? Nominal interest rate (percent per year) 8 7- 1 Draw an arrow on the MD curve to show the effect of a rise in the intérest rate above 5 percent a year. Label it 1. 5- Draw an arrow on the MD curve to show the effect of a fall in the interest rate below 5 percent a year. Label it 2. 4- 3- When the interest rate falls, other things remaining the same, the opportunity cost of holding money and MD the O A. falls; quantity of money demanded increases B. rises; quantity of money demanded decreases 3.0 C. falls; demand for money increases 2.6 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 Quantity of money (trillions of dollars) OD. rises; demand for money decreases 70°F Sunnyarrow_forward
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