Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Interest rate determination
The real interest rate r will be equal to the equilibrium real interest rate
In the classical model we define equilibrium real interest rate r* as the real interest rate where savings is equal to investments, S(r*) = I(r*). As we know that S = I is a requirement for the financial market to be in equilibrium.
In the classic model, real interest rate determines the flow of funds into and from the financial market. A higher real interest rates will result in larger flows of funds into the market (savings depends positively on r) and smaller flows out from the market (investment depends negatively on r). Real interest rate will be such that the flows into market are specifically equal to the flows out of the market.
Figure: Determination of the real rate
From this graph we can determine the size of investments and savings. In equilibrium when r = r*, S = I that is what we need for GDP identity to hold. Once we know savings, we can determine household savings from SH = S - SG - SR.
In the classical model, expected inflation pe is an exogenous variable and because R = r + pe we can determine nominal interest rate from the real rate.
The data set lowbwt.sav contains information for a sample of 100 low birth weight infants born in two teaching hospitals in Boston. Measurements of systolic blood pressure are sa
what is the relationship betwen growth and poverty? either it is positive or negative?
Reaganomics Supply-side economics or New Classical Economics has gained distinct prominence in the early 1980s with the election in the U.S.A of a conservative government unde
Imagine Adam Smith living in today's economic climate. Describe what current economic issues about which he might be most concerned with and state why?
why lm curve upward sloping and is curve downward sloping?
what is microeconomics
Four different measures of GDP Using circular flow model we see that there are 4 equivalent ways of measuring GDP: Using the definition: market value of all finished goo
Robert's New Way Vacuum Cleaner Company is a newly started small business that produces vacuum cleaners and belongs to a monopolistically competitive market. Its demand curve for t
applicability of the lewis model in developing countries
(a) Use this information to set up a diagram showing the firm''s total revenue and total cost schedules. In this diagram, show the points at which the firm is maximizing profits.
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!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd