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.
Demand: Demand is quantity of a good buyer who wishes to purchase at each conceivable price. The law of demand explains us that if the price of certain commodity increases,
Historically, the proportion of students entering a university who finished in 4 years or less was 64%. To test whether this proportion has decreased, 122 students were examined an
The AS-AD model with inflation When we remove assumption of constant prices to allow varying real wages. Resulting model was known as AS-AD model. Similarly we now remove the a
Q. Money market with inflation and constant money supply growth? If π M = π and π e = π, both IS- and LM-curve will be fixed. Figure: The money market with inflatio
Explain the excise terms of tax. The excise terms of tax: a. Tax incidence b. Excess burden c. Deadweight loss d. Tax revenue
Filbert and Lychee have convex indifference curves. Note Filbert is indifferent between baskets (3, 2) and (4, 1)--these are x, y coordinates. Lychee is indifferent between baskets
You win a lottery. You have the choice of two ways to be paid. If you pick Payout Scheme X, you get $2,750 today. If you pick Payout Scheme Y, you get three payments: $1,000 today,
Equilibrium and Disequilibrium In physical sciences, equilibrium is a state of balance between opposing forces or actions. The meaning of equilibrium in economic theory is exa
Doesn''t money move out of stock markets into bond? If more people buy bonds does this not push bond prices up and yields down? My question is about this quote from the Gardian tod
Minimum wage laws are common in many countries. The debate over minimum wage includes claims about the impact of this action on employment levels and wage levels. What impact does
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