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.
Major fiscal objective of Chancellor George Osborne The major fiscal objective of Chancellor George Osborne when coming to office in May 2010 was to remove the UK's structural
Stan Garner resides in Illinois and promotes boxing matches for Super sports, INC. an Illinois corporation. Garner created the connect of "ages" promotion- a three fight series of
At first, Say's Law may seem 'obvious'. Though, it's not - actually, it's highly controversial. The reason it may seem obvious is that you have perhaps learned from microeconomics
Some manufacturing and agricultural products produced in the Midwest are exported to overseas markets. US consumers and businesses also purchase many products produced outside the
Consider the impact of an increase in thriftiness in the Keynesian-cross analysis. Assume that the marginal propensity to consume is unchanged, but the intercept of the consumption
Ashley can join a club for an annual fee of $20. if she can purchase golf balls at 40% off the retail price. Draw ashly's budget constraint if she joins and if she does not join th
Explain the multiplier effect with example Deposits and loans in banks give rise to an important multiplier effect. We use a simple example to illustrate this effect. Consider
The LM-curve in the AS-AD model The LM-curve will shift upwards (downward) when P is increases (decreases) in the AS-AD model is moved L
Explain the difference between productive and allocative ( economic ) efficiency. Explanation of productive efficiency, e.g. output at AC minimum Define to the effect th
Aggregate supply Remember that labor demand provides us profit-maximizing quantity of L for a given real wage. If W/P is given (as it's in cross model), we can find profit-maxi
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: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd