Just 3 questions, thanks! If interest rates are rising in an economy, what might
ID: 1102772 • Letter: J
Question
Just 3 questions, thanks!
If interest rates are rising in an economy, what might have been the relationship between saving and investment that caused this to happen?
a) Savings had been greater than investment demand
b) Investment demand had been greater than savings
c) Savings and investment were both rising rapidly
d) Savings and investment were both falling rapidly
If consumer confidence rises because of strong job growth in an economy, what is likely to happen to the rate of saving?
a) Silver quarters made prior to 1965.
b) The savings rate will likely fall.
c) The savings rate will likely fall to zero.
d) The savings rate will turn negative.
How does an increase in the savings rate affect the multiplier in an economy, if at all?
a) The multiplier would turn from positive to negative.
b) The multiplier would stay the same.
c) The multiplier would increase.
d) The multiplier would decrease.
Explanation / Answer
Answer:- If interest rates are rising in an economy, what might have been the relationship between saving and investment that caused this to happen?
Correct Answer:- b) Investment demand had been greater than savings
Reason:- When the demand for investment is more than saving, the government will increase the interest rates to promote saving to fund the investment requirements.
Answer:- If consumer confidence rises because of strong job growth in an economy, what is likely to happen to the rate of saving?
Correct option:- b) The savings rate will likely fall.
Reason:- With the better forecasting of job market, the customers will spend more and reduce their saving.
Answer:- How does an increase in the savings rate affect the multiplier in an economy, if at all
Correct option:- d) The multiplier would decrease.
Reason:- Multiplier = 1/mpw
Thus as saving increases, multiplier decreases.
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