2005 #1
1.
Assume that declining stock market prices in the
United States cause many United States financial investors to sell their stocks
and increase their money holdings.
a.
Draw a correctly labeled graph of the money
market and show the impact of the financial investors’ actions on each of the
following.
i.
Demand for money
ii.
Nominal interest rate
2010 #2
2.
A drop in credit card fees causes people to use
credit cards more often for transactions and demand less money.
a.
Using a correctly labeled graph of the money market,
show how the nominal interest rate will be affected.
2007 Form B #2
2.
a.
Assume that businesses are granted a tax credit
on spending for machinery. Using a correctly labeled graph of the loanable
funds market, show the effect of the business sector’s response on the real
interest rate.
b.
Now assume instead that the tax rate on interest
income from household savings is lowered and there is no change in government
budget deficit. Using a second labeled graph
of the loanable funds market, show the effect of the households’ response on
the real interest rate.
2005 Form B #3
3.
Assume that an increase in government spending increases
the budget deficit in Country A.
a.
Using a correctly labeled graph of the loanable
funds market, show the effect of the increase in Country A’s budget deficit on
the real interest rate.
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