Assume you are an economist at Reserve Bank of Vanuatu. The government has been considering tax reforms to modernize the economy. Using relevant diagram(s) show and explain how a change in the income tax is likely to influence real interest rate, savings and investment.

Q: rates affect business? Consumers?

A: Market interest rate plays extremely essential part in the business and customer spending in light…

Q: What happens to the value of nominal interest rate in the economy when the Federal Reserve buys…

A: The federal reserve operates the monetary policy. The open market operation is used to buy or sell…

Q: The idea that people like to borrow more money at lower real interest rates and prefer to borrow…

A: Answer -  Given in the question - People like to borrow more money at lower rates and prefer to…

Q: Discuss briefly how do interest rates affect the economy?

A: The amount of interest due per year, expressed as a percentage of the amount lent, invested, or…

Q: Activities in financial markets have direct effects on individual wealth, the behavior of business,…

A: In the case of individuals' wealth real estate market also has a significant effect on an…

Q: What happens when interest rates increase? SAND

A: Interest rate plays an important role in the consumption and investment decisions of people and…

Q: Assume the Bank of Canada conducts an open market purchase, which increases real GDP. What happens…

A: The central bank practice of purchasing and selling treasury securities, as well as other assets, on…

Q: By using graphs, show and explain each of the following events as either leading to an increase or a…

A: A decrease in price level (deflation) will lead to interest rate of the economy because there is…

Q: A country reduces its government budget deficit and also makes political reforms that lead people to…

A: If a country is having a lower deficit then its demand for funds falls to cover the deficit. This…

Q: Referring to the two figures, which of the following sequences (numbered arrows) shows the logic of…

A: Interest rate is usually controlled by the central bank of a country. The central bank fixes the…

Q: complete this sentence: High interest rates might might purchasing a house, but at the same time…

A: High interest effects both the borrower and lender in the different manner As interest rate…

Q: In general, the more the government borrows, interest rates should [rise, fall, remain unchanged].…

A: The government borrows the money to fill the gap of Fiscal Deficit. A fiscal Deficit is a difference…

Q: What does the Fisher Effect tell us about the bond and loanable funds markets?

A: In classical economics, the equilibrium interest rate in the economy is determined in the loanable…

Q: In case government increases taxes and government spending by equal amount, what is the impact of…

A: This multiplier calculates the impact on GDP of increasing both government expenditure and taxes at…

Q: By using graphs, show and explain each of the following events as either leading to an increase or a…

A: a) When central bank adopts contractionary monetary policy then LM curve will shift to the left and…

Q: Predict how each of the following economic changes will affect the equilibrium price and quantity in…

A: Whenever demand rises, the demand curve will shift to the right and whenever demand falls, the…

Q: borrowing in a market for loans to purchase homes, measured in millions of dollars, at various…

A: Market is at equilibrium where demand  for loan and supply of loan equal  at certain interest rate…

Q: What will happen in the bond market if the government imposes a limit on the amount of daily…

A: If the government limits the number of transactions in the bond market, then it would make it…

Q: If the central bank’s goal is to maximize output, what interest rate will we expect in equilibrium?

A: The actions undertaken by the monetary authority of an economy, usually the central bank, to promote…

Q: The relationship between interest rate and Money supply is ____ Select one: a. Positive b.…

A: The money supply refers to all of a country's currency and other liquid assets on the measurement…

Q: Identify each of the following acts as representing either saving or investment. a. Lan uses some of…

A: An entity or organization that is being engaged in activities of professional, commercial, or…

Q: __________ are an efficient and convenient way for governments and corporations to borrow large sums…

A: Stocks and bonds have an advantage over bank loans. This is because bank loans are less flexible and…

Q: Analyze what will happen to the equilibrium interest rate when discount rate increases and the level…

A: Bank rate is also known as the Discount rate is the rate at which commercial banks take money from…

Q: Concerning the behavior of interest rates, With the help of a graph show and briefly explain what…

A: An interest rate lets you know how high the expense of getting is, or high the prizes are for…

Q: If the equilibrium price of bonds increases, what happens to the associated interest rate?

A: In a bond market, the price and interest rate are inversely related.

Q: Savings, Investment Spending, and the Financial System - End of Chapter Questions 12. Indicate…

A: a) When Rupert Moneybucks buys 100 shares of existing Coca-Cola stock, he is investing in a…

Q: (Market Interest Rate) With a diagram, show how the supply of money and the demand for money…

A: The way in which the supply and the demand for money determine the rate of interest, and the shapes…

Q: 8. Using an appropriate diagram, explain how the equilibrium interest rate is determined in the…

A: The equilibrium interest rate is considered as a rate at a point where the quantity of money…

Q: Draw a graph depicting interest rates at the quantity of loanable funds. Answer the following…

A: Market for loanable funds studies the behavior of interest rate and quantity of loanable funds with…

Q: When nominal interest rates are zero, the central bank can still lower them by printing money and…

A: The nominal interest rate refers to rate that measure the changes in dollar amount. It does not take…

Q: Suppose that the nominal interest rate is zero; that is, R = 0 . (a) What is the equilibrium…

A: Given; The nominal interest rate is zero; R=0 a) The inflation rate is equal to the real interest…

Q: Robust economic growth shifts the transactions demand for money. Consequently, growth will tend to…

A: Economic growth is defined as increasing a country's actual Gross Domestic Product (GDP). This aids…

Q: The Federal Deposit Insurance Corporation is at least partly to credit for which of the following?…

A: Federal Deposit Insurance Corporation is one of those two organizations that provide insurance to…

Q: Answer the question based on the following information: For transactions, households and businesses…

A: Transaction demand for money is equal to the one-half of the nominal GDP.  Nominal GDP is $300 So,…

Q: By using graphs, show and explain each of the following events as either leading to an increase or a…

A:

Q: 14. Today many Central Banks around the World are thinking of increasing interest rates. Why? What…

A: Note: We will answer the first question as the exact one was not specified. Please resubmit the…

Q: For the next 5 questions, assume that the economy starts in equilibrium: -the output is 1 million…

A: Coupon rate refers to stated as the interest rate of the bond, it refers to the annual income of an…

Q: 6. Answer all of the following: (a) As a first-year student, you need to borrow £40,000 in order to…

A: Borrowings and loans  Borrowing refers to the take cash from banks and financial institutions for a…