After report in newspapers that savings are at an all time low, households begin to save more
- Using a correctly labeled loanable funds graph, show and explain how the change in savings will impact real interest rates in the US in the short-run.
- The nominal interest rate is currently at 8% and there is no expected inflation. If government announced a 3% expected inflation rate, determine the value of both:
- new nominal interest rate
- new real interest rate
3.Explain how the change in real interest rates identified in part (1) will affect investment spending by businesses