Problem

In the financial market, what causes a movement a…

01:38

Problem 4 Medium Difficulty

In the financial market, what causes a movement along the demand curve? What causes a shift in the demand curve?

Answer

no answer available

Related Courses

No Related Courses

Principles of Microeconomics for AP® Courses

Chapter 4

Labor and Financial Markets

Discussion

You must be signed in to discuss.

Top Educators

Watch More Solved Questions in Chapter 4

Problem 1

Problem 2

Problem 3

Problem 4

Problem 5

Problem 6

Problem 7

Problem 8

Problem 9

Problem 10

Problem 11

Problem 12

Problem 13

Problem 14

Problem 15

Problem 16

Problem 17

Problem 18

Problem 19

Problem 20

Problem 21

Problem 22

Problem 23

Problem 24

Problem 25

Problem 26

Problem 27

Problem 28

Problem 29

Problem 30

Problem 31

Problem 32

Problem 33

Video Transcript

All right, We're doing number four from chapter four. It's asking in the financial market what causes a movement along the demand curve. What causes a shift in the demand curve? So let's draw the financial market supply and demand up. Here we have that looking are up here. We have our for the real interest rate. And down here, we have quantity of yeah, uh, financial assets. Um, here's our supply. There's our demand. And this question is asking about demand. Um, and what's gonna cause the movement along the curve to say, here or here, Well, that's gonna be caused by a corresponding change in interest rates. So as you can see ah, shifting from the middle point the original equilibrium here, uh, either to have higher quantity would cut would be because of a lower interest rate. You are have a lower quantity because of a higher interest rate on this makes sense because interest rate is pretty much the price you pay for financial assets. So, like, for example, if you're taking out a loan to start a business on dhe, you can have a 5% rate, or you can have a 2% interest rate. You're definitely gonna want the 2% interest rate because, you know, you're paying less. In the long term, you're only paying back 2% of it. Um, so then the second part of this question is asking, uh, what causes a shift in the demand curve? So because you're the man Kirk to go, look here, we'll hear shift, right, our shift left. And they're a bunch of examples given in the book. But one of them would be like, just the general, Uh, you know, macro economic situation. She's like a recession or boom or bust. If the whole economy is in a recession, people probably aren't going to want to take out loans. And because of that, they're not gonna want financial assets. Conversely, if the economy is doing really really well, well, then more people are gonna want to, you know, take out loans, start businesses, choir, capital, whatever that

Get More Help with this Textbook