Which of the graphs below most closely depicts: 21) the effect on domestic bank
ID: 1105915 • Letter: W
Question
Which of the graphs below most closely depicts: 21) the effect on domestic bank rates of interest of an increase in foreign investment? Graph A 2) Graph B 3) Graph C 4) Graph D 5) [not enough information to answer] 22) the effects on bank rates of interest of increasing expectations of a recession? Graph A 2) Graph B 3 Graph C 4) Graph D 5) not enough information to answer] 23) the effects on bank rates of interest on fixed-rate loans of expectations of increasing inflation? 1) Graph A 2) Graph B 3) Graph C 4) Graph D 5) [not enough information to answer] 24) the effects on domestic bank rates of interest of a policy to monitor foreign depositors' accounts closely and to report tax evasion to foreign officials ? Graph A 2) Graph B 3) Graph C 4) Graph D 5) [not enough information to answer]Explanation / Answer
21. Graph A.
As the foreign investment increases, the demand for domestic currency goes up. The demand curve shifts to the right. The interest rate and the total demand for money increases.
22. Graph B.
As the expectation of recession increases, the demand for domestic currency would decrease as investors would find it less attractive to hold. The demand curve would shift to the left. The interest rate and the total money would decrease.
23. Graph B.
As the expectation about the future inflation rises, people would be not willing to keep cash in hand and the demand curve would shift to the left.
24. Graph B.
Less foreigners would be willing to hold the domestic currency due to this policy imposition. The demand curve would shift to the left.
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