Answered: The IS curve Oshifts to the left shifts…

The IS curve Oshifts to the left shifts to the right shifts up all of the above none of the above when the real interest rate increases.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter18: Pricing The Factors Of Production

Section: Chapter Questions

Problem 2DQ

See similar textbooks

Related questions

Q: If interest rates in the economy rise over time this is: O Good for lenders but bad for borrowers…

A: If the interest rate is rising over time, it is good for lenders but bad for borrowers.

Q: how the nominal interest rate, the real interest rate, and inflation are relatedthrough the Fisher…

A: The interest rate in economics is that amount of payment that a lender charges on a borrower in…

Q: What would be the effect of the following on the equilibrium level of real interest rates: .…

A: Loanable Funds Market: In the market for loanable funds there are economic agents like governments,…

Q: The national saving schedule (S) is usually drawn with a positive slope because: a. the value of…

A: The national saving Schedule represents the relationship between the level of national saving (S)…

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: Long run real interest rates are expected to increase. How will an accountant and economist view the…

A: An interest rate that has been modified to take inflation into consideration is known as a real…

Q: Consider the relationship between income and interest rate in the financial market. Suppose there…

A: Household savings are one of the important sources of supply of funds in the financial market.

Q: pose that interest'rates fall. This will cause:

A: If interest rates falls then cost of borrowing money from the money market decreases. Investors…

Q: Question 1. When the interest rate increases, the price of consumption when old relative to the…

A: An interest rate is the cost or price of borrowing money or the return on investment for lending or…

Q: Which of the following graphs shows what would happen to the investment line if the real interest…

A: There is an inverse relationship between the real interest rate and the investment => when the…

Q: Its given that the real interest rate in the economy is zero. Explain when can this happen

A: Economy whenever we are working upon the nominal interest rate we need to keep in mind the value of…

Q: Which of the following statements is correct? a. An increase in the real interest rate (r) will,…

A: Firm will hire the capital till the point where marginal product of capital is equal to the rental…

Q: Assume an economy with 600 consumers. Each consumer has income in the current period of 70 units and…

A: Dispsable income is the income available to the consumers after paying the taxes and social security…

Q: he supply of loanable funds has a slope because the grea the quantity of loanable funds supplied.…

A: I think the question you are asking is -the supply of loanable funds has a________ slope because the…

Q: What is law of constant in micro and macro economics also explain law of increasing return in…

Q: The expendnures of a typical family on gas, food and clothing in 2009 and 2010 are given in the…

A: Consumer price index or CPI is the weighted average of the prices of consumers basket of goods and…

Q: You borrow $50,000 today at a rate of 5%. Today, inflation instantly rises to 7% and stays that way…

A: The inflation and nominal interest rate are considered while lending out the money. The Change in…

Q: Explain the nominal interest rate and effective interest rate. When both become the same number and…

A: Nominal interest rate is the interest rate which does not take into account the effect of…

Q: Suppose you are about to borrow $15,000 for four years to buy a new car. Briefly explain which of…

A: Interest rate is the price of the loanable funds in the market.It can be in real and nominal terms.…

Q: In the IS curve, if Y falls for any given level of the real interest rate ________. saving…

A: Hello. Since your question has multiple parts, we will solve the first question for you. If you want…

Q: What is the difference between nominal and real interest rates? O A. The nominal interest rate is…

A: Answer: Correct option: E (A and C only) Explanation: Option A is correct because nominal interest…

Q: The interest rate on Real Return Bonds is a direct measure of Select one: O a. the rate of deflation…

A: Real interest bonds in economics are basically known to be as the government bonds which are…

Q: It has been said that a society with high savings rate is a society with a high standard of living.…

A: (Q) It has been said that a society with a high savings rate is a society with a high standard of…

Q: How each of the real interest rate ad the nominal interest rate is determined and explain the…

A: Real rate of interest and nominal rate of interest.

Q: The “prime” interest rate is the rate that bankscharge their best customers. Based on the…

A: The interest rate that depicts the real yields to lenders and the real fund cost to borrowers is…

Q: Do you think a negative nominal interest rate can happen? What about a negative real interest rate?…

A: When people borrow money from the lender, a proportion of the amount borrowed is paid additionally…

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: Which of the following is most likely to cause a rightward shift of the investment demand curve? O…

A: A rightward shift of the investment demand curve implies an increase in the demand for investment. A…

Q: Table 2.5.4 from BEA What categories of consumption expenditures have the highest inflation rate…

A: Inflation rate refers to the rate at which prices for goods and service increase over time.…

Q: Assume that the stock market experiences a massive rally, leading to a significant increase in…

A: Meaning of Goods Market: The term goods market refers to the situation under which the…

Q: Refer to the figure above. Assume that the loanable funds market initially is in equilibrium at…

A: New equilibrium is at point A where new demand curve(D2) and new supply curve(SA) intersect.

Q: This refers to an income instrument that represents a loan by an investor to a borrower. Ο Α. Stock…

A: An investor is a person or other entity (such as a company or mutual fund) who invests money in the…

Q: Suppose that Annie's real income this year is $150 and next year it will be $100. Assume that the…

A: Incomes Y1=150 and Y2=100 And r=0.1

Question

The IS curve
O shifts to the left
shifts to the right
shifts up
all of the above
none of the above
when the real interest rate increases.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

5
1f the Consumption funchon, espressedas C=30+0,7Yd, chayes to C=20+028Yd. which of the fellowing will accaur? OThe Cansumption function Shifts.doon in. Parallel. 6 its slope Anckeases as the Consumpion functionmaes up O Hs Slape ockeases as the Sausing function. slides up its Slope 1wereases as the Consumption function. slides dacana O it sope deExeAses as the Saurisq function. sltdes down. the Sauting
hich theory of consumption best explains the consumption behavior of consumers of our economy? Question No: 02 [Marks: 10] If the State Bank started printing large quantities of Pakistani Rupees (Rs), what would happen to the number of Pakistani Rupees a dollar could buy? Why? Question No: 03 [Marks: 10] Deseribe the difference batuuean foreian diract investmet and foraion nortfolie invastment Who is mora likelu to
It has been said that a society withhigh savings rate is a society with ahigh standard of living. Discuss thelink (if any) between saving andstandard of living and also explainthe overall economic function ofprofits.
Suppose that Yvette receives a pay raise of $1,200 per year. She can either use the extra money to consume goods and services, or she can save it by depositing it in a bank For each of the alternative annual interest rates in the following table, indicate how much interest Yvette would eam per year on her annual raise if she saves it. (Note: Assume that no income taxes are deducted.) Interest Rate Interest Earned (Dollars) (Percent) (Dollars) 20 A higher interest rate gives Yvette, incentive to save.
Consider the impact of a cut in the interest rate set by the central bank (the "policy rate"), which causes banks to lower interest rates for both borrowers and lenders. Select one or more: U a. Borrowers like Julia will definitely be better off O b. Borrowers like Julia will definitely increase their current consumption O c. If Marco is a saver (not an investor) he will definitely be worse off O d. If Marco is a saver he will definitely decrease his consumption
How should an increase in inflation affect the interest rate on an adjustable-rate mortgage?
Imagine that the government statisticians who calculate the inflation rate have been updating the basic basket of goods once every 10 years, but now they decide to update it every five years. How will this Change affect the amount of substitution bias and quality/new goods bias?
Table 4.6 shows the amount of savings and barrowing in a market for loans lo purchase homes, measured in millions of dollars, at various interest rates. What is the equilibrium interest rate and quantity in the capital financial market? How can you tell? Now, imagine that because of a shift in the perceptions of foreign investors, the supply curve shifts so that there will be 10 million less supplied at every interest rate. Calculate the new equilibrium interest rate and quantity, and explain why the direction of the interest tale shift makes intuitive sense.
What is the difference between the price level and the tale of inflation?
How to Measure Changes in the Cost of Living introduced a number of different price indices. Which price index would be best to use to adjust your paycheck for inflation?
The prime interest rate is the rate that banks charge their best customers. Based on the nominal interest rates and inflation rates in Table 19.10, in which of the years would it have been best to be a lender? Based on the nominal interest rates and inflation rates in Table 19.10, in which of the years given would it have been best to be a borrower?