what is the effect on IS or LM curve when there is increase in household savings?
442257
Short Answer: \nUsually increases in savings shift the IS curve left and the LM curve down.\n\n\n\nReasoning Behind the Short Answer: \n.......See:  http://pages.stern.nyu.edu/~nroubini/NOTES/CHAP9.HTM\n.......See:  http://www.nd.edu/~tcosiman/ch-9.html\n\n   A higher saving rate (the ratio of S to Y) is also a lower consumption rate, since saving and consumption sum to after-tax income.  An increase in the saving rate is a leftward shift in the IS curve.  In the short-term, if individuals decide to consume less, this hurts firms, who are trying to sell, and leads them to lay people off.  But, in the long term, a high savings rate usualy means more investment, growth in capital, & increases in output & wages.  \n\n   The LM curve summarizes equilibrium in the market for money.  The position of the LM curve depends upon the real money supply.  An increase in the real money supply for a given level of GDP, usually increases total savings, which implies lower interest rates, shifting the LM curve downward. \n \n\n\nIf you want to know more about what IS & LM Curves represent:  \n.......See:  http://en.wikipedia.org/wiki/IS/LM_model\n\nIS: Investment/Saving equilibrium used to represent equilibrium in the product market, where total spending (Consumer spending + planned private Investment + Government purchases + net exports) equals an economy's total output and income. To keep the link with the historical meaning, the IS curve can represent the equilibrium where total private investment equals total saving, where the latter equals consumer saving plus government saving (the budget surplus) plus foreign saving (the trade surplus).\n\nLM:  Liquidity preference/Money supply equilibrium represents the equilibrium of the demand to hold money as an asset and the supply of money by banks and the Central Bank.\n\nSo, in IS/LM equilibrium, both product markets and money markets are in equilibrium.
873035
I believe the answer is b, as the bank keeps a $100 000 reserve (10%) for $1 000 000 outstanding loans - and that this is a closed system. \nI'm not sure about the multiplier though - that's the ratio of saved income - I don't know how you're supposed to figure it out from that data.
688950
the short answer is inflation . when inflation is high the fed will raise the interest rate to combat and try to slow down inflation .
57320
You're forgetting that interest is often tax-deductible. If you can take advantage of that, you aren't paying as much. And yes, some houses can double or triple in value in a relatively short amount of time. It all depends on where you buy.
581029
i would think there would be a few more interest rate increases. The housing market is most likely to cool in the coming months.
899699
567/540=1.05\n 5%increase
223215
If people buy whole life insurance policies they are buying both life insurance and an investment vehicle.\nThe money above what pays for the insurance is the 'savings' part of the policy and thus increases the national savings rate.\nThe US national savings rate recently has been negative for the first time in our nation's history.  It means people as a whole are spending more than they are bringing in.\nIt is a sad harbinger of an impending credit crisis.\nInterest rates will soar.\nIt's best to try to limit your credit and save more if you can right now.
20575
% change in quantity that consumer is willing to buy, divided by % change in income (assuming that the price of good is held constant). \n\nTells you how much impact do changes in income have on the demand. If less than 1, it is called inelastic, and there is little change in demand; is larger that 1, - elastic and high changes.
165677
In a recessionary type environment, expansionary fiscal policy can promote employment by increasing demand for goods and services. This occurs when a rise in consumption happens from things like a lowering of taxes giving consumers more free money to spend.\nThe government will borrow more money which will make interest rates rise. This will attract foreign investors which in turn will bring the value of the dollar up. If the dollar is worth more, then imports will be cheaper (while exports will be more expensive to the recipients).
690043
If by the diminishing rate of interest you mean the APR (in the UK) - ie the rate that takes into account the fact that the loan will decrease in value over the term as it is repaid off....\n\nthen it will be slightly less than double the flat rate - so about 15%.\n\nNow this does depend on the size of the loan and the term - but it's a good approximation.
55006
Basically your standard deduction is doubled and your tax will be at a lower rate. If there are kids, you have more deductions depending on your income and their ages.
1124998
It all depends on the interest rate.  The higher the rate, the more the payment will be.
150009
If I understand your assignment correctly, our economy has been changed by terrorism due to 9-11 because of the shock to economies based on tourism (remember, people were afraid to travel); job losses, particularly in the service industry; and housing.  Because of the war against terrorism and the interference with oil production, costs have been driven up.  The higher oil price impacts everything because of freight costs: food trucked from warehouse to local grocer, manufacturing, housing materials.\n\nAlso, the higher price means we all pay more at the pump.  For those with low discretionary income ($ left after paying rent or mortgage and utilities, car payments or car lease payments) (aka fixed expenses), the higher gas price in effect drives down their wages because it is costing more to drive to work.  This extra expense means less money for other things, such as necessities as food, and less to spend on new clothes, CDs, and other manufactured goods, the sale of which brings up the US economy.
187202
Nothing would happen, because by putting your money in the bank, what you are really doing is lending it to the bank to spend. when you put your money in the bank the bank uses it to make loans and the money cycle continues. the only way the economy would slow down by saving is if everybody save the money under their beds outside the money loop.
435730
an increase in the money suply would have an increase inthe real gross domestic product, this is because we assume that the production level in the short run is of static equilibrium and thus more money is supplied which would increase the level of unemployment a this would increase the leve of productivity and also the real gross domestic product
389057
I agree with VATreasuries, whom I will say has a very appropriate user name.\n\nHigher interest rates affect the monthly amount of money that people need to debt service a property.  Essentially, if money costs more... their costs are higher accordingly.\n\nOther factors like taxes & hazard insurance have similar effects (we Floridians know this all to well) restricting value.  Herein Monthly Costs.\n\nWhen these Monthly Costs exceed pace of income growth to where they become a higher ratio of gross income needed to service monthly... property values tend to recede.\n\nThese past years have arguably been an anomoly... largely because of an influx of investment dollars into real estate holdings.
65836
A substantial increase in inflation will diminish the purchasing power of money.  Say you kept $100 under your bed.  If the inflation rate jumped up to 10% (high), then your $100 can't buy $100 of stuff anymore.  Something that cost $100 last year would cost $110 now.  In essence, you lost 10% of your purchasing power.