Using the figure above, show the effect on the real interest rate and the quantity of loanable funds of an increase in expected profit
What will be an ideal response?
The increase in expected profit increases investment and shifts the demand for loanable funds curve rightward. As the figure shows, the result is that the real interest rate rises (to 8 percent in the figure) and the equilibrium quantity of loanable funds increases (to $4 trillion in the figure).
You might also like to view...
Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
Cable television companies must pay increased charges by the networks for the programs the cable companies carry. As a result, the price of cable television rises. Thus
A) the demand curve for cable television service shifts rightward. B) the demand curve for cable television service shifts leftward. C) there is a movement down the demand curve for cable television to a higher quantity demanded. D) there is a movement up the demand curve for cable television to a smaller quantity demanded.
Purchasing power parity is the theory that, in the long run, exchange rates should be at a level such that equivalent amounts of any country's currency
A) should earn the same real rate of return. B) are valued inversely relative to the size of its GDP. C) will equalize nominal interest rates across countries. D) allow one to buy the same amount of goods and services.
What can the Federal Reserve do to increase the natural rate of unemployment?
A) nothing B) follow contractionary monetary policy that will increase inflation C) follow contractionary monetary policy that will reduce inflation D) follow expansionary monetary policy that will increase inflation