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The real-balances effect refers to the effect that a change in interest rates has on the real value of wealth. True or False True False
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- An increase in the expected rate of inflation will the expected return on bonds relative to the that on real assets, and shift the curve to the .After staying virtually flat for about a year and a half, the average lending rate of banks has started to show signs of decline in April after the Bank of Ghana reduced the monetary policy rate the month before. The Summary of Economic and Financial Data (May 2020) published by the Bank of Ghana has shown that average lending rate has finally moved out of its comfort zone to a step downward. Prior to recording 22.38 percent in April, the average lending rate has since the past 17 months (December 2018) not come below 23%.How would banks benefit when interest rates decrease?What are the effects of an increase in the current capital stock on real interest rate, aggregate output, employment, the real wage, consumption, and investment?
- For each of the following events, explain the shortrun and long-run effects on output and the price level, assuming policymakers take no action ( Remember SRAS can also shift!!) The stock market declines sharply, reducing consumers’ wealth. (7.5) A technological improvement raises productivity. (7.5)If consumption depends positively on the level of real balances, and real balances depend negatively on the nominal interest rate, then:Suppose the current level of output and the interest rate are such that the economy is operating on neither the IS nor LM curve. Which of the following is true for this economy? A) Production does not equal demand. B) The money supply does not equal money demand. C) The quantity supplied of bonds does not equal the quantity demanded of bonds. D) Financial markets are not in equilibrium. E) all of the above
- What does this mean? "When drawn against the real interest rate, output supply increases if the labor supply is increasing in the interest rate."By using graphs, show and explain each of the following events as either leading to an increase or a decrease in the equilibrium interest rate? a)A decrease in the price level b)An increase in the discount rate c)A decrease in the level of aggregate outputBy using graphs, show and explain each of the following events as either leading to an increase or a decrease in the equilibrium interest rate? d)A sale of government securities by the TCMB f)An increase in the discount rate e)decrease in the level of aggregate output
- Refer to Figure 11.1. A movement from Point D to Point A can be caused by Group of answer choices a decrease in nominal aggregate output. an increase in income. a decrease in the interest rate. an increase in the interest rate.Unexpectedly, the US government announced that it would be drastically reducing government spending in the coming months. How will this affect aggregate demand and interest rates? a. Aggregate demand will shift right; interest rates will rise b. Aggregate demand will shift right; interest rates will fall c. Aggregate demand will shift left; interest rates will rise d. Aggregate demand will shift left; interest rates will fallRefer to Figure 11.1. All of the following events can cause a movement from Point E to Point A EXCEPT Group of answer choices an increase in real output and income. a decrease in the interest rate. an increase in the nominal aggregate output. an increase in the aggregate price level.
