Microeconomics,, 16th Canadian Edition

The lower the rate of interest, the larger is the firm’s demand for investment. The lower the interest rate, the higher is the p ...

1 Positive investment may not add to the firm’s capital stock if it is just enough to replace obsolete capital. In this discussi ...

The Economy’s Demand for Investment The economy’s overall demand for investment is determined from the demands of individual fir ...

15.4 The Supply of Capital The supply of financial capital is determined by households’ saving decisions. Saving is the differen ...

expenditures. Young couples, for example, save in order to accumulate enough funds for a down payment on a house. Couples with y ...

For any given level of current income, households tend to save less when their expected future income is higher. If people antic ...

How does an increase in the interest rate affect households’ desire to save? The interest rate is the “price” of financial capit ...

Figure 15-4 The Economy’s Supply of Saving The Economy’s Supply of Saving The economy’s supply of saving is shown in Figure 15-4 ...

constant) leads to a decrease in households’ desired saving at any given interest rate and thus causes the supply curve to shift ...

15.5 Equilibrium in the Capital Market We have discussed how the economy’s demand for capital is related to the interest rate; a ...

given market price for the product they sell, but that price is determined in equilibrium through the interaction of demand and ...

inflation is 5 percent. When the price level is falling, inflation is negative. If prices are falling at a rate of 2 percent per ...

interest rate is the difference between the nominal interest rate and the rate of inflation. If lenders and borrowers are concer ...

In this chapter we have examined investment demand by firms and the supply of saving by households. In both cases, the interest ...

Figure 15-5 The Capital Market Figure 15-5 shows how the interest rate is determined in the capital market. The intersection of ...

Figure 15-6 Changes in the Capital Market Changes in the Market Equilibrium We are now ready to examine some of the changes that ...

Changes in the demand for or the supply of financial capital lead to changes in the equilibrium interest rate and levels of inve ...

important reason that the economy’s supply of saving continues to increase. Population Growth An increase in the population—ei ...

of Figure 15-6. There are three possible causes of an increase in the demand for financial capital. Population and Income Growt ...

physical capital. One effect of such policies is to increase firms’ demand for financial capital. Reductions in corporate income ...