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What would an increase in money demand do to the interest rate?
Wiki User
∙ 13y ago
This depends on a range of factors, including what cause the change, whether the change was in quantity along a curve or a shift of the curve, the monetary regime in place in the country, and the decision of that regime in regards to increased money demand.
However, the simplest way to restore money demand to its original location would be to raise the interest rate, thus making it most costly to hold money and decreasing money demand. So if the regime wished to restore money demand, then it would raise the real interest rate.
Wiki User
∙ 13y ago
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Would banks decrease or increase interest rates if they had less money to loan?
If banks had less money to loan they would increase their interest rates. This is because they would have to make the most profit off of the little money that they had to use. When banks have a lot of money to loan, interest rates are lower because they can still get a lot of interest even from the lower interest rates.
What would be the effect on the demand for narrow money if an increase in real GDP?
what's the answer?
When is the LM curve relatively steep?
If money demand has low sensitivity to change in interest rate,the interest rate would have to rise by a large amount to reduce the demand for real balance back to the fixed leveli.e the level at which demand for money is equal to supply of money.Accordingly,the LM curve would be quite steep
What effects would the expectation of rapid inflation have on aggregate demand?
since you are assuming that the price value of money will increase you will spend more money now then later... thus, causing AD to increase
Is an increase in demand represented by a movement up the demand curve?
An increase in demand is represented by a shift of the demand curve to the right; not a movement along the demand curve. An increase in the quantity demanded would be a movement down the demand curve.
What would happen to the economy if the Government lowered interest rates?
Governments decreases interest rates so that, when interest rates are lowered, borrowings will be more cheaper, which would encourage investors borrow more money. This would increase investments in an economy, which would thereby increase production, demand for labor and thereby the average salary, which consequently leads to economic growth.
Would banks decrease or increase interest rates if they had less money to loan?
If banks had less money to loan they would increase their interest rates. This is because they would have to make the most profit off of the little money that they had to use. When banks have a lot of money to loan, interest rates are lower because they can still get a lot of interest even from the lower interest rates.
What would be the effect on the demand for narrow money if an increase in real GDP?
what's the answer?
Why did northerner industrialists favor protective tariff's?
To reduce competition from foreign grain producers. Northern America industrialists increase the demand for American. This is for manufactured goods.
When is the LM curve relatively steep?
If money demand has low sensitivity to change in interest rate,the interest rate would have to rise by a large amount to reduce the demand for real balance back to the fixed leveli.e the level at which demand for money is equal to supply of money.Accordingly,the LM curve would be quite steep
What effects would the expectation of rapid inflation have on aggregate demand?
since you are assuming that the price value of money will increase you will spend more money now then later... thus, causing AD to increase
Why did industrialist favor protective tariffs?
It would increase the demand for American manufactured goods. Tariffs would also increase the money generated by the sale of those goods.
Is an increase in demand represented by a movement up the demand curve?
An increase in demand is represented by a shift of the demand curve to the right; not a movement along the demand curve. An increase in the quantity demanded would be a movement down the demand curve.
What are the Methods of monetary policy?
The Monetary Policy Committee have at their disposal 2 methods of monetary policy 1. Interest Rates, 2. Money Supply 1. Interest rate GENERAL INFO The interest rates determine the profit earned from savings and the cost of a loan. The US rate is 2% at the moment, so your savings in the US probably give you a profit of 1.5% per year If you borrowed money from a bank you would probably pay around 2.5% per year. HOW IT WORKS The interest rate directly affects the disposable income of a consumers (income - tax - bills). An increase in interest rates makes savings more profitable and makes loans more costly. AN INCREASE (DECREASE) IN INTEREST RATES WILL DECREASE (INCREASE) CONSUMER SPENDING 2. Money supply Money supply can be defined in to ways. The amount of your currency in circulation (eg the total money that can be accessed by members of your population. Or the total value of every printed note in circulation (includes foreign countries). Money supply works with interest rates to maintain equilibrium. EG. When you increase interest rates, you reduce the demand for money. In this instance the demand for money is less than the supply of money. In order to restore equilibrium, the government must withdraw money from circulation (buy selling bonds) thus reducing money supply
If the demand for money increases and the fed wants interest rates to remain unchanged what would be an appropriate policy?
Buy bonds in the open market
Would the concepts of cross elasticity of cross elasticity of demand and income elasticity of demand be of any interest to a pharmaceutical company?
I am at a loss for the answer please help me.
What economic policy does the government use when it controls the money supply?
the term is dear money policy, rbi increases crr rate n bank rate to so that commercial bank will have less funds to give loans which would lead to increase in interest rates and decrease demand for loan, now many investor will cut their plan of taking loan hence there would be less demand for it..........less demand will lead to either fall in price or a stable price of commodity for which loan is taken.........hence inflation is controlled
