A QUESTION OF ECONOMICS

Suppose there is a decrease in people's wealth because of a financial crisis. At the same time, the banks hold more excess reserves by calling back loans. With the aid of a diagram, explain under what condition the nominal interest rate will fall.

United States’ households, institutions, and domestic businesses saved almost $1.9 trillion in 2013. Where did that savings go and what was it used for? Some of the savings ended up in banks, which in turn loaned the money to individuals or businesses that wanted to borrow money. Some was invested in private companies or loaned to government agencies that wanted to borrow money to raise funds for purposes like building roads or mass transit. Some firms reinvested their savings in their own businesses.

A QUESTION OF ECONOMICSSuppose there is a decrease in people's wealth because of a financial crisis. At the same time, the banks hold more excess reserves by calling back loans. With the aid of a diagram, explain under what condition the nominal interest rate will fall.​

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A QUESTION OF ECONOMICS

Suppose there is a decrease in people's wealth because of a financial crisis. At the same time, the banks hold more excess reserves by calling back loans. With the aid of a diagram, explain under what condition the nominal interest rate will fall.