next year to be 2 percent and the nominal interest rate is percent. Suppose that corporations expect better profit conditions in the future and, so, decide to borrow more $20 million more than before to invest in plants and equipment. At the same time, FDIC increases the amount of deposit insurance from $150,000 to $250,000 (as it did during the 2007-09 financial crisis). This reduces the credit risk for households and, as a result, more households keep their savings in their bank deposit accounts. The increase in the amount of bank deposits enables banks to lend more money to business firms and households. The amount of loanable funds supplied increases by $40 million. Because of these

next year to be 2 percent and the nominal interest rate is percent. Suppose that corporations expect better profit conditions in the future and, so, decide to borrow more $20 million more than before to invest in plants and equipment. At the same time, FDIC increases the amount of deposit insurance from $150,000 to $250,000 (as it did during the 2007-09 financial crisis). This reduces the credit risk for households and, as a result, more households keep their savings in their bank deposit accounts. The increase in the amount of bank deposits enables banks to lend more money to business firms and households. The amount of loanable funds supplied increases by $40 million. Because of these

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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