This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: In the short run, how is the interest rate determined? If the interest rate is less than the ... (Read 126 times)

Mr.Thesaxman

  • Hero Member
  • *****
  • Posts: 514
on: Jun 29, 2018
In the short run, how is the interest rate determined? If the interest rate is less than the equilibrium interest rate, what occurs?
 
  What will be an ideal response?

Question 2

Why do economists use graphs?
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

coreycathey

  • Sr. Member
  • ****
  • Posts: 333
Reply #1 on: Jun 29, 2018
Answer to Question 1

The interest rate is determined in the money market by the interaction of the demand for money and the supply of money. If the interest rate is less than the equilibrium, there is an excess demand for money. In order to increase the quantity of money they hold, people sell bonds and other financial assets. As a result, the price of financial assets falls and the interest rate rises. People continue to sell assets and the interest rate continues to rise until it reaches its equilibrium.

Answer to Question 2

Graphs help economists, and others, to visualize the relationships between economic variables. Graphs that plot variables together help economists understand if the variables are related and how they are related. Graphs also help provide a visual picture of economic models that link different variables. Indeed, many other disciplines use such visual models. For example, architects work with blueprints (their model) and the blueprints represent every detail of a building. Economists' models do not reflect of every detail of the real world, but the graphs that they use nonetheless are valuable because they help clarify the linkages between the variables.


Mr.Thesaxman

  • Member
  • Posts: 514
Reply 2 on: Jun 29, 2018
Gracias!

coreycathey

  • Member
  • Posts: 333
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

Illness; diuretics; laxative abuse; hot weather; exercise; sweating; caffeine; alcoholic beverages; starvation diets; inadequate carbohydrate consumption; and diets high in protein, salt, or fiber can cause people to become dehydrated.

Did you know?

More than 50% of American adults have oral herpes, which is commonly known as "cold sores" or "fever blisters." The herpes virus can be active on the skin surface without showing any signs or causing any symptoms.

Did you know?

Drug-induced pharmacodynamic effects manifested in older adults include drug-induced renal toxicity, which can be a major factor when these adults are experiencing other kidney problems.

Did you know?

Pope Sylvester II tried to introduce Arabic numbers into Europe between the years 999 and 1003, but their use did not catch on for a few more centuries, and Roman numerals continued to be the primary number system.

Did you know?

The highest suicide rate in the United States is among people ages 65 years and older. Almost 15% of people in this age group commit suicide every year.

For this bimolecular reaction, the rate constant k is second order For this bimolecular reaction, the rate constant k is second order
Table 6.1 illustrates the main regime types and their differences. It breaks the regimes into four Table 6.1 illustrates the main regime types and their differences. It breaks the regimes into four
Advection of an air mass with a different ELR (environmental lapse rate). Advection of an air mass with a different ELR (environmental lapse rate).
The rate of facilitated diffusion The rate of facilitated diffusion
For each function f(x) = 6x^2 - 4, estimate the instantaneous rate of change for the given ... For each function f(x) = 6x^2 - 4, estimate the instantaneous rate of change for the given ...
A bus starts from restat a station and accelerates at a rate of 2 m/s^2 for 15 seconds. It then runs A bus starts from restat a station and accelerates at a rate of 2 m/s^2 for 15 seconds. It then runs
Video: Sickle Cell Anemia

For a complete list of videos, visit our video library