Question

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

Answer #1

Interest rate is directly proportional to savings because if the interest rates are high savings are high and if interest rates are low then savings are low.

Inflation is inversely proportional to savings because if inflation is high then there will be less savings and if inflation is low means there are more savings.

Interest rates are inversely proportional to Investment because if interest rates are higher then there will be less Investment and Vice-versa.

Inflation and Investments are also inversely proportional because if there is high inflation then investments will decrease. and Vice-versa.

What is inflation and explain how inflation impacts a savers
decision regarding the interest rate they will demand of
borrowers?

a. What is realised real interest rate? Can a change in expected
inflation rate affect the realised real interest rate? Explain.
b. Suppose that there is an increase in expected inflation rate
from 3 percent to 6 percent. Given that the after-tax expected real
interest rate remains unchanged at 2 percent and the tax rate is 30
percent, find the original and the new nominal interest rates.
c. Suggest ONE way in which investors can reduce/avoid the risk
of unexpected...

Distinguish between the nominal rate and the real rate of
interest. How does inflation affect the real, ex post (after the
fact) rate of return to investors?

If more Canadians adopted a “live for today” approach to life,
how would this affect saving, investment, and the interest
rate?
What is the role of the financial system? Name and describe two
markets that are part of the financial system in our economy. Name
and describe two financial intermediaries.

Tax law provisions tend to change over time. Explain
how this might affect tax research and planning and provide an
example of when this has happened.

Please EXPLAIN why each answer was chosen
1. reduction in the saving rate will NOT affect which of the
following variables in the long run?
A. the amount of capital in the economy. B. output per worker.
C. capital per worker. D. the growth rate of output per worker. E.
none of the above
2. Which of the following will cause an increase in output per
effective worker?
A. an increase in the rate of depreciation. B. an increase in...

How does a positive production shock effect the:
1) Saving and investment
2) Interest Rate

Can
you explain how the long run model exchange rate affect gdp in
relation to inflation?

How does a decrease in expected inflation affect output and
interest rates in the IS-LM model? Explain. Does the Fisher effect
hold in this context? Explain.

What are the FOMC’s current opinions on economic growth,
unemployment, interest rates, and inflation? How might their stance
change moving forward?

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