Lower interest rates tend to lead to _______ spending by consumers and businesses, while higher interest rates tend to lead to ______ consumer and business spending. Question 39 options: A) it is not possible to tell from the information given B) lower; higher C) lower; lower D) higher; higher E) higher; lower
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Lower interest rates tend to lead to _______ spending by consumers and businesses, while higher interest rates tend to lead to ______ consumer and business spending.
Question 39 options:
- A)
it is not possible to tell from the information given
- B)
lower; higher
- C)
lower; lower
- D)
higher; higher
- E)
higher; lower
Step by step
Solved in 2 steps
- Which one of the following statements is FALSE?(a) There are four broad groups of decision‐making units in the economy:households, firms, government and the foreign sector;(b) Savings are an important injection into the circular flow of income andMultiple‐choice questions: Select one correct answer for each of the following. In your answer booklet, write down only the number of the question and next to it, the letter of the correct answer.spending in the economy;(c) Taxes are a leakage or withdrawal from the flow of income and spending in the economy;(d) Spending by households on consumer goods and services is calledconsumption spending.10 00 Interest Rate (%) N B Investment Demand 0 $30 60 90 120 150 Investment ($) Price Level Multiple Choice AS Real GDP ($) AD₁ (1=120) AD₂ (1=90) *AD3 (1=60) Refer to the graphs, in which the numbers in parentheses near the AD₁, AD2, and AD3 labels indicate the level of investment spending associated with each curve. All numbers are in billions of dollars. The interest rate and the level of investment spending in the economy are at point D on the investment demand curve. To achieve the long-run goal of a noninflationary, full-employment output Qfin the economy, the Fed should try to decrease aggregate demand by increasing the interest rate from 2 to 4 percent. decrease aggregate demand by increasing the interest rate from 4 to 6 percent. increase aggregate demand by decreasing the interest rate from 4 to 2 percent. increase the level of investment spending from $120 billion to $150 billion.(Percent) 2 1 7 10 9 8 0 0 Supply Demand 100 200 300 400 500 600 700 800 .LOANABLE FUNDS (Billions of dollars) 900 1000 is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied than the quantity of loans Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is, demanded, resulting in a of loanable funds. This would encourage lenders to the interest rates they charge, thereby the quantity of loanable funds supplied and, the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of %
- D3) Why would banks use more equity to invest in their assets, knowing that it would scare off a lot of shareholders? What is wrong with this statement? Do they usually start using equity as investments when they can not use anymore money from depositors which forces them to use it? Are banks allowed to hold equity has an investment? One of your fellow students was specifically looking at the Equity Multiplier calculated from the Balance Sheet from your assignment for this week, which went up by a lot in only one year between 2019 and 2020. Why do you think this happened? "Bank equity capital is a source of funding for asset growth and also function to provide confidence for bank creditors that they will get their funds back."Explain 16 correctlyQuestion 1 Table 1: Economy X Demand for Money Quantity of Money Nominal Interest Rate (% per year) Holdings ($M) A 7 2.4 B 5 3.0 C 3 4.0 (i) What is the relationship between the two variables as shown in table 1 and why does this relationship exist? (ii) Assume the quantity of real money supplied (money supply) is $3M when interest rates are at 5%. Describe what is occurring when interest rates are at 7%?
- 1. Positive feedback loops 1. Consider two variables: X and Y. True or False: A positive feedback loop arises when X increases Y, and Y decreases X. A. True B. False 2. Consider the following scenario: You deposit an initial balance into an interest-bearing savings account. This cash deposit results in an interest payment credited to that account, further growing the account balance. This interaction between the size of the interest payments and overall amount of funds in your account A. is B. is not an example of a positive feedback loop.QUESTION 1Coffee is now the second most traded commodity in the world after crude oil. Not only has demand for various coffee products risen sharply in Western countries in recent years, increasingly there is also greater taste for coffee drinks in developing countries such as China and India. In addition, by-products of coffee beans have become popular such as coffee leaves which can be used to brew a tea with known health benefits. However, as a natural produce, coffee plants are subject to weather conditions. Recently major producers such as Brazil have been plagued by droughts. Using the demand-supply model, explain the likely effects of these phenomena in the coffee bean market. How can a market analyst use this information to her advantage? QUESTION 2The internet and online social media in particular are giving people unprecedented ability to express their views and share information with others. On the other hand the truth of what people say online and the sheer volume of…Refer to the figure below: Insurance and pensions 11.9% Item a. Entertainment b. Transportation c. Clothing Housing 32.8% Item Weight 0.053 0.159 0.03 Entertainment 5.3% Transportation 15.9% Price Change 20% -8% 100% Health care 8.1% Source: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey (2018 data). Use the item weights in the figure to determine the percentage change in the CPI that would result from a(n) a. 20 percent increase in entertainment prices. b. 8 percent decrease in transportation costs. c. doubling of clothing prices. (Note: Review the table titled "Computing Changes in the CPI" in your text for assistance.) Instructions: Enter your responses as a percentage rounded to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Food 12.9% Impact on CPI (Inflation Effect) Clothing 3.0% Miscellaneous 10.1%
- (Please 2 answer s) Question 27 : Consider tablets which are used by a majority of consumers. Suppose that due to the development of 5G technology, tablets underwent a major advance from 2020 to 2021 in terms of the number of functions they could do. The tablets in 2021 sold at the same price as those in 2020. Which of the following would tend to increase in 2021 as a result of this major advance? Select only one : O CPI O Purchasing power of money O GDP deflator O None of the above Question 28 : Suppose a country enters a major recession where the number of unemployed increases a lot and the wages of jobs fall a lot. Assuming no other major changes, what would be the effect of this change on a country's CPI? Select only one : O Increase O Decrease O Stays the same O Unclear11) (MC) In the macroeconomic model below, Y is aggregate output, C is aggregate consumption, I is aggregate investment, r is interest rate, Go is government spending, Mo is supply of money, and t is tax rate. The variables Y, I, C, and r are endogenous, Go, Mo, and t are exogenous, and a, b, c, d, k, and m are parameters. a) Y* = Using Cramer's rule, solve for Y* and I*. Which of the following gives the equilibrium values of Y* and I*? b) c) d) Y* = f) Y* = e) Y* = Y* = Y* = 0 Y* = m Mo + b(ca) kd + m [1 − b(1 – t)] Y=C+I+Go C = a + b(1 t)Y Mo + Go kd + m [1 − b(1 – t)] - Mo+mGo+c+a kdm [1+b(1 t)] I* = mGo - c + a kd-bt dMo + m (Go+c+a) kd+m[1-b(1 – t)] - kdm [1 + b(1 aGo-c+mMo kd-bt I* = I* = I* = -dk (a + Go) t)] I* = I= c - dr MokY mr mCka+dGo kd + m [1 b(1 t)] - I* = 0 m - dk (a + Go) kd+m[1-b(1 – t)] mC (mCdMo) b(1 t) - dk (a + Go) kd+m[1-b(1 – t)] - (mC+dMo) b(1-t) kd-bt mCb(1 t) kd-btQuestion: What is "Fiscal Policy"? Is the fact that the Federal Reserve is raising interest rates a part of Fiscal Policy? Please select the BEST answer choices from the options provided. A) Yes, when the Federal Reserve increases interest rates the Fed is using fiscal policy to address an economic problem. B) Fiscal policy has to do with the Federal Budget - federal spending and revenue. When the Federal Reserve increases interest rates, the higher interest rates make it more expensive for both public and private entities to borrow and spend. Therefore, spending, both government and private, will decrease. This is why, when the Federal Reserve raises interest rates it is "fiscal policy." C) Yes, fiscal policy has to do with the budget and interest rates. Any action by the Federal Reserve regarding interest rates will be fiscal policy. D) Fiscal Policy is the use of government spending and taxes to deal with the economy's problems such as slow growth, high…