Most affected by the lowering of interest rates in economy

Assignment Help Business Economics
Reference no: EM131392755

Four reasons behind the downward slope to the Aggregate Demand Curve! The price level and aggregate demand are negatively related because of:

List and discuss four “effects”

For example, one of the reasons for the downward slope of the demand curve (that is, the negative relationship between the price level and C + I + G + NX) is the interest rate effect. Demonstrate you understand the interest rate effect by completing the following problems:

A) The opportunity cost of holding money is _____________ .

B) Assume there is a sudden negative supply shock in the economy that lead to a reduction in short run aggregate supply (say a drought, or higher wages throughout the economy). Below, draw a money demand and supply graph to illustrate the effect of the higher price level on the money market (remember, the “price” of money is the interest rate):

Referring to your graph above, outline the three steps that lead from an increase in the price level to a change in aggregate demand (AD):

The higher price level leads to:

ii_______________________________, and

iii. the following change in aggregate demand:________________________________________.

C) What type of spending that is most affected by the lowering of interest rates in the economy? Also state whether the spending is higher or lower as a result of lower interest rates.

D) Investment is an important (and volatile) component of GDP. List 5 specific purchases that would be included as “Investment” when calculating GDP = C + I + G + NX.

Reference no: EM131392755

Build equivalent plant-what should the manufacturer do

A manufacturer has paid an engineering firm $200,000 to design a new plant, and it will cost another $2 million to build the plant. In the meantime, however, the manufacturer

Is leisure a giffen good at high or low wage rates

If an individual’s labor supply curves slopes forward at low wages and bends backward at high wages, is leisure a Giffen good? If so, is leisure a Giffen good at high or low w

Delaware senate approved gun buyback program

On June 14, 2011, the Delaware Senate approved a gun buyback program. The yearlong program would authorize the state to pay $100 for every gun turned over to police. What sort

Sometimes provide subsidies to specific industries

Government sometimes provide subsidies to specific industries; that is, they reduce a domestic firms cost so that it can sell products on the international market at a lower p

The income elasticity of demand

Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is true? If the prices of computer tablets rise, we would expect the number of t

Currently without health insurance coverage

Tom is currently without health insurance coverage. He derives utility (U) from his income (Y) according to the following function: U=2(Y1/4). Supppose Tom must pay a premium

Explain the factors that cause an increase in demand

List and explain the factors that cause an increase in demand (i.e., shift the demand curve to the right). If price is or is not one of these factors, explain why? List and ex

Three-period-lived people in overlapping generations

Consider an economy of three-period-lived people in overlapping generations. Each person is endowed with y goods when young and old and nothing when middle-aged. The populatio


Write a Review

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd