Question

How does a positive production shock effect the:

1) Saving and investment

2) Interest Rate

Answer #1

How does a positive production shock affect the a) the demand
and supply of labor b) ISLM model c) aggregate demand d) price e)
the demand and supply of money f) saving and investment g) interest
rate

How does a positive production shock effect the
a) the demand and supply of labor
b) ISLM model
c) Aggregate demand

how
does money velocity and interest rate effect lowes forecast?
negative or positive

2.Assume that investment depends on both the interest rate and
the level of GDP. We will call the effect of output on investment
(loosely) the “accelerator” effect. a. Compare the multipliers for
an adverse demand shock on Y with and without the accelerator
effect using (i) the algebraic solution for the multiplier and (ii)
IS and LM curves. b. Does the addition of the accelerator affect
the direct, positive or negative feedback effects? c. Also show how
the addition of...

Explain how change in the interest rate and inflation might affect
saving and investment decision in the economy?

How does market risk effect stocks? How does interest rate risk
effect bonds?

(Classical theory) Suppose that saving is totally
inelastic with respect to the real interest rate.
Consumption depends on disposable income. (5x3=15)
Discuss the effect of an increase in tax on investment and real
interest rate.
What is the effect of an increase in investment demand on
saving and real interest rate?
Explain the effect of an equal increase in tax and government
expenditure on investment and real interest rate.

Assume that investment depends on both the interest rate and the
level of GDP. We will call the effect of output on investment
(loosely) the “accelerator” effect.
Compare the multipliers for an adverse demand shock on Y with
and without the accelerator effect using (i) the algebraic solution
for the multiplier and (ii) IS and LM curves.
Does the addition of the accelerator affect the direct, positive
or negative feedback effects?
Also show how the addition of the accelerator effect...

What happens to saving, investment, the trade balance, the
interest rate, and the exchange rate when fiscal policy reduces
import?

AVOID PLARGISIM PLEASE !
REFRENCES REQUIRED
Q. 1. How does Financial System
Coordinate Saving and Investment? Explain in detail.
Q. 2. Discuss role play by Bank in the
monetary system? How do bank create money?
Q. 3. Analyze and create T-account balance
sheets.

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