Use the graph in Figure 7.9 to answer the following questions: a. Suppose the government restricts total

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Use the graph in Figure 7.9 to answer the following questions:

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a. Suppose the government restricts total borrowing to an amount less than L̅. What would the effect be on capital holdings?b. Find the effect of an increase in the supply of loans on capital and the interest rate. What would the effect be on the interest rate if there were no capital?c. Find the effect of a decrease in capital's rate of return on the amount borrowed and the stock of capital.

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Modeling Monetary Economies

ISBN: 978-1107145221

4th Edition

Authors: Bruce Champ, Scott Freeman, Joseph Haslag

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