What is meant by the intertemporal substitution effect

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Questions -

Q1. What is meant by the intertemporal substitution effect? How does an increase in interest rates affect aggregate household spending through the intertemporal substitution effect?

Q2. Describe the wealth effect and discuss how would an increase in interest rates is likely to affect aggregate household spending through the wealth effect?

Q3. An increase in the interest affects a firm's behavior in various ways depending on its balance sheet accounts, how might rising interest rates affect firms spending and investment behavior through the funding cost effect?

Q4. Explain the concepts of the expectations effect and second- round effects. How might the second-round effect enhance the effect of a change in monetary policy stance?

Reference no: EM133165294

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