Give a brief description of the transmission mechanism, Macroeconomics

Assignment Help:

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.

 


Related Discussions:- Give a brief description of the transmission mechanism

Calculate rental price of capital, Let the real interest rate, i r , equal ...

Let the real interest rate, i r , equal 5 percent and the rate of depreciation, d, equal 10 percent.  In this case, if the price of a piece of capital is P K = $10,000, what is th

Calculating the accounting and economic profit , Kate uses a sewing machin...

Kate uses a sewing machine to alter and repair clothes for one year in her own small business, Kate's Tailoring. She earns $20,000 during the year for various sewing projects. In t

Estimate the wacc and cost of capital, Cowboy Corporation is estimating its...

Cowboy Corporation is estimating its WACC.  The firm's debt structure contains: (1) 30,100 long-term bonds with an 8.1% coupon, paid semiannually, a 10 years-to-maturity, and a $10

AD-AS, THE AD CURVE SHIFT TO THE LEFT WHEN

THE AD CURVE SHIFT TO THE LEFT WHEN

Quiz, To overcome the stagnant growth it was experiencing for the past 10-1...

To overcome the stagnant growth it was experiencing for the past 10-15 years, Japan undertook which of the following measures? Answer Undertook programs to build infrastructure

Three independent variables, In a regression analysis, three independent va...

In a regression analysis, three independent variables are used in the equation based on a sample of forty observations. What are the degrees of freedom associated with the F-statis

George and harriet, Consider an economy in which George and Harriet consume...

Consider an economy in which George and Harriet consume only ale and bread. George's utility function is UG = aG(bG- 1) where aG and bG are his consumption of ale and bread. Harrie

Draw the strategic form game, Consider a two-player game where player A cho...

Consider a two-player game where player A chooses "Up," or "Down" and player B chooses "Left," "Center," or "Right". Their player is as follows: When player A chooses "Up" and play

Keynesian theory, what is static and dynamic multiplier in keynesian theory...

what is static and dynamic multiplier in keynesian theory?

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