How does fall in real interest rate affect consumption, International Economics

Assignment Help:

Q. Consider the economy is initially consuming along the intertemporal budget constraint at point A, where no saving occurs. How does a fall in the real interest rate, r, and affect present consumption?

Answer: A diminishes in the real interest rate r causes the budget line to rotate counterclockwise about point A diminish the slope and causing a rise in present consumption.


Related Discussions:- How does fall in real interest rate affect consumption

Relative income of workers in australia as a result of trade, Q. Using the...

Q. Using the diagram, show what happens to the composition of production (that is quantity of cloth per 1 unit of food) in Australia once trade is established between the two coun

Explain cost of production in terms of world trade, Q. If scale economies ...

Q. If scale economies were not only external to firms, but were also external to individual sites. That is, the larger the worldwide industry (regardless of where plants or firms

Regain internal and external balance after first oil shock, Q. How did coun...

Q. How did countries use their policy tools to regain internal and external balance after the first oil shock of 1973? Answer: Seeing that the recession deepened over 1974 an

Floating exchange rate regime, Q. What has been learned since 1973 with reg...

Q. What has been learned since 1973 with regard to the experience with floating exchange rate regime? Answer: 1. Monetary policy autonomy:   Yes though floating rate didn

What can explain failure of relative ppp to hold in reality, What can expla...

What can explain the failure of relative PPP to hold in reality? Answer: Government procedures of the price level differ from country to country. One cause for these differe

The wage rate, Q. Suppose the relative price of good 1 falls relative to th...

Q. Suppose the relative price of good 1 falls relative to the price of.  What happens to the wage rate? Answer: The labour component of the price of 1 is bigger than that of p

Explain the money markets of two countries, Q. Explain the followin...

Q. Explain the following figure: Answer : The figure explicate how the money markets of two countries are linked through the foreign exchange market. The financial pol

Trade theory, haberler`s theory of neoclassical theory of trade

haberler`s theory of neoclassical theory of trade

What is the policy of sterilization, Q. What is the policy of steri...

Q. What is the policy of sterilization? Give an example. Answer: • Untainted foreign exchange intervention - policy by which central banks perform equal foreign

Write Your Message!

Captcha
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