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Chapter 4: Q7 (page 104)
Which of the following changes in the financial market will lead to a decline in interest rates:
a) rise in demand
b) fall in demand
c) rise in supply
d) fall in supply
Fall in demand and rise in supply leads to decline in interest rates in financial market.
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Other than the demand for labor, what would be another example of a 鈥渄erived demand?鈥�
Imagine that to preserve the traditional way of life in small fishing villages, a government decides to impose a price floor that will guarantee all fishermen a certain price for their catch.
a. Using the demand and supply framework, predict the effects on the price, quantity demanded, and quantity supplied.
b. With the enactment of this price floor for fish, what are some of the likely unintended consequences in the market?
c. Suggest some policies other than the price floor to make it possible for small fishing villages to continue.
Suppose that a 5% increase in the minimum wage causes a 5% reduction in employment. How would this affect employers and how would it affect workers? In your opinion, would this be a good policy?
Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers.
a. The number of people at the most common ages for home-buying increases.
b. People gain confidence that the economy is growing and that their jobs are secure.
c. Banks that have made home loans find that a larger number of people than they expected are not repaying those loans.
d. Because of a threat of a war, people become uncertain about their economic future.
e. The overall level of saving in the economy diminishes.
f. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.
Select the correct answer. A price ceiling will usually shift:
a. demand
b. supply
c. both
d. neither
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