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Give a brief description of the transmission mechanism
1. When the central bank target rate increases, other interest rates in the economy will increase (and the money supply will decrease, but that is not important here).
2. With higher interest rates, it is more expensive to borrow and more advantageous to save. Therefore, consumption and investment will decrease (we say that the central bank "cools off" the economy).
3. As consumption and investment fall, GDP is reduced and unemployment will rise. This will cause inflation and the growth rate in wages to fall.
acceptedcapital structure theories
State the term- - GDP is a flow Lastly, note that GDP is a flow variable and not a stock variable. By a flow variable we mean a variable which is measured in something per uni
Pucker Lemonade, Inc., is a small company that produces bottled lemonade. Pucker's fixed cost includes the monthly rental cost of the lemon-smashing machines, the bottling machines
what wil hapen to the real wage if the nominal wages and prices rise at the same rate per year?
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