Regarding the effects of a tight monetary policy (higher interest rate) which of the following statements is incorrect ? A) Households , consumption spending will decline since higher interest rates are likely to decrease the value of household's wealth. B) For a household that is not a borrower with an initial level of debt , a rate in interest rates is likely to reduce the household's interest.. and increase its dispesable income. C) The funding costs effect suggests that higher interest rates are more likely to slow down firms' spending and investments. .... D) Higher interest rates lower the value of firms' assets and lower asset prices make firms' applications for bank loansmore difficult. E) Higher interes rates can draw capital inflows into the domestic economy and lead to a strengtheining of the exchange rate and strengtheining of the exchange rate is likely to affect both costs and revenues of domestic firms,especially those that produce expprts,or those competing with imports.

Regarding the effects of a tight monetary policy (higher interest rate) which of the following statements is incorrect ? A) Households , consumption spending will decline since higher interest rates are likely to decrease the value of household's wealth. B) For a household that is not a borrower with an initial level of debt , a rate in interest rates is likely to reduce the household's interest.. and increase its dispesable income. C) The funding costs effect suggests that higher interest rates are more likely to slow down firms' spending and investments. .... D) Higher interest rates lower the value of firms' assets and lower asset prices make firms' applications for bank loansmore difficult. E) Higher interes rates can draw capital inflows into the domestic economy and lead to a strengtheining of the exchange rate and strengtheining of the exchange rate is likely to affect both costs and revenues of domestic firms,especially those that produce expprts,or those competing with imports.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter20: Exchange Rates And The Macroeconomy

Section: Chapter Questions

Problem 3TY

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if the government cuts taxes in period 1 and cuts government spending in period 2 - this will increase the disposable income of the consumers - won't this increase consumption for consumers having an ambiguous effect on private saving. this is because if consumption is a normal good - increasing the income - positive income effect. My question is for some reason if consumer' disposable income increases - doesnn't this mean consumption must increase - whether it increases more/ enough to neutralise the tax cut effect is debatable and situation dependent - but surely there is an ambiguous effect on private saving for this reason
***PLEASE READ THE QUESTIONS CAREFULLY - PART B HAS MULTIPLE REQUIREMENTS*** Given: Barbara has an income of $2000 this year, and she expects an income of $1100 next year. She can borrow and lend money at an interest rate of 10%. Consumption goods cost $1 per unit this year and there is no inflation. a. What is the net present value of Barbara’s endowment? b. On a graph show the combinations of consumption this year andconsumption next year that she can afford. Label Barbara’s endowment with the letter E. Write down Barbara’s budget equation. What is the slope of Barbara’s budget line?
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