Guide Answers: Part 5
2 . (a) More, because your wealth has grown; (b) even more, because the residence has become more liquid; (c) less, mainly because its predicted return offers fallen in accordance with Microsoft share; (d) more, because it has become less risky relative to shares; (e) fewer, because their expected go back has fallen.
7. In the loanable funds framework, when the economy booms, the demand for provides increases. The public's profits and wealth rises even though the supply of bonds also improves, because businesses have more appealing investment possibilities. Both the supply and demand curves (Bd and Bs) shift to the right, but since is mentioned in the text message, the demand shape probably adjustments less than the supply curve hence the equilibrium interest rises. Likewise, when the economic system enters a recession, both supply and demand curves shift to the left, but the demand curve adjustments less than the provision curve so that the interest rate is catagorized. The conclusion is the fact interest rates go up during booms and land during recessions: that is, interest rates are procyclical. The same answer is found with the liquidity preference framework. When the economy feus, the demand for money increases; people need more money to handle an increased volume of orders and also since their wealth has gone up. The demand curve, Md, hence shifts towards the right, increasing the balance interest rate. If the economy makes its way into a recession, the demand for money falls as well as the demand curve shifts to the left, lowering the equilibrium interest. Again, rates of interest are seen being procyclical.
Article Answers: Part 6
your five. The within the value of stocks and shares would boost people's riches and therefore the with regard to Rembrandts will rise.
6. When the Fed offers bonds to the public, it increases the flow of bonds, hence shifting the supply curve Baloney to the correct. The result is which the intersection in the supply and demand figure Bs and Bd occurs at a lower price and a...
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