the economy is in recession and government increases money supply do you think it will affect product market? How it will affect i. the price level and value of money, ii. Loanable fund market: expected inflation and real GDP? Use the relevant diagrams.

the economy is in recession and government increases money supply do you think it will affect product market? How it will affect i. the price level and value of money, ii. Loanable fund market: expected inflation and real GDP? Use the relevant diagrams.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Savings,investment And The Financial System

Section: Chapter Questions

Problem 4CQQ

See similar textbooks

Similar questions

Question 1 a. Use the loanable funds diagram to explain how you would expect an increase in inflationary expectations to affect: b. A. the supply and demand schedule c. The nominal rate of interest d. An increase desire to save for old age e. A reduction in taxes on income from saving
The accompanying graph represents the market for loanable funds in the hypothetical country of Bunko. Assume the market is initially in equilibrium and inflation expectations are 2%. a. Adjust the graph to demonstrate the effects of inflation expectations increasing from 2% to 4%. Market for Loanable FundsInterest rate (%)Quantity of loanable funds (billions of $)02468101214161820012345678910DS b. What is the real interest rate after the change in inflation expectations? 3% 2% 5% 7% c. Which effect below characterizes the relationship between inflation expectations and nominal interest rates? The Leontief Paradox The Inflation effect The Fisher effect The Pigou effect
1. Deficits and debt. Take an example 2. Understanding economic growth. Take an example. 3. Quantity theory of money. Take an example
In 1981, many interest rates in the United States were 15%, but the inflation rate was 10%. In 2015, many interest rates were less than 1%, and the inflation rate was 2%. a. What were the real interest rates in 1981 and 2015? b. all else equal, how does the drop in interest rates between 1981 and 2015 affect the quantity of loanable funds supplied?
If the Money Supply increases, what happens in the Market for Loanable funds? Draw the graph. Make sure to label the axes.
Investment — End of Chapter Problem Move the appropriate curve or curves in each graph to illustrate the effect of each of the four events on the market for loanable funds. If the event should not impact the market for loanable funds, then leave the graph unchanged.
A rise in the federal funds rate a. raises the long-term real interest rate. b. does not change the long-term real interest rate. c. lowers the long-term real interest rate. d. may raise or lower the long-term real interest rate, depending on whether the demand for loanable funds curve has a negative or a positive slope.
Complete the following statements. a. Dan saves a portion of his income in an interest-earning account. In the loanable funds market, Dan is b. John owns a pizzeria and needs to borrow money for a new oven. In the loanable funds market, John is c. Savers like Dan are likely to save more when the real interest rate . Therefore, the supply of loanable funds Look at images for word bank . d. Borrowers like John are likely to borrow more when the real interest rate . Therefore, the demand for loanable funds .
An economy's saving rate increased from -0.1 percent in 2015 to 2.0 percent in 2016 to 2.4 percent in 2017, to 2.9 percent in 2018, and to 3.0 percent in 2019. Explain why the saving rate might have increased and its effect on the supply of loanable funds. The saving rate might have increased because The increase in the saving rate will the supply of loanable funds. A. financial market turmoil could decrease wealth and expected future income; increase B. the demand for loanable funds could have decreased; decrease C. financial market turmoil always increases wealth and expected future income; increase D. financial market turmoil could decrease wealth and expected future income; decrease O E. the demand for loanable funds could have decreased; increase Click to select your answer. javascript:doExercise(13); esc 吕0 888 F1 F2 F3 F4 F5 F6 F7 F8 F9 F10 ! @ # 2$ & 1 2 3 4 5 7 8 Q W E Y tab T
Draw a graph of the supply and demand of loanable funds. Then, show how the interest rate will be affected when the following scenarios occur: a. The government implements a program that reduces investment tax credits. b. The government budget deficit is reduced by 30%. (Hint: Does the government still need to borrow?) c. More foreigners are saving their money in U.S. banks.
What is true about equilibrium in the market for loanable funds? A. Savings = gross domestic product (GDP) B. Investment = interest rate C. Interest rate = inflation D. Investment = savings
Interest rates are important in explaining economic activity. A. Using a correctly labeled graph of the money market, show how an increase in the income level will affect the nominal interest rate in the short run. B. Using a correctly labeled graph of the loanable funds market, show how a decision by households to increase saving for retirement will affect the real interest rate in the short run.