how come 5 is A? didnt CPI increase? so shudnt it be contractionary monetary policy? i dnt know, i got C for question 5Answers are as follows (99% sure)
Why do you think it's B? Household savings wont rise.. according to the intertemporal substitution effect or whatever it's called they'll spend more and save less.9 cood be both B and D, i think they will allow both
Why do you think it's B? Household savings wont rise.. according to the intertemporal substitution effect or whatever it's called they'll spend more and save less.
Furthermore, the fact that lower income earners are more likely to be the one's taking out loans... if the rates decrease, they have more disposable income and because they have high MPC's, they wont save that money, rather, they'd spend it.
Some aussies might even go, shit son these rates are frikken low! and go invest their money overseas.
So overall.. no I don't think it can be B, it's definitely D
I think you're getting the two accounts mixed up...what you have said is is true, but all those who have loans (mortgages etc), will be paying less interest rates, monthly, therefore there will be less money withdrawn from their account on a monthly basis, thus leading to an increase in national savings.* All other things being equal, they don't necessarily increase spending since there has been no mention of an injection of funds into the economy by the government. But part of what your saying is true so there is a chance they could accept both answers.