CHAPTER Interest Rates and Why They Change Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-1 Major Factors Determining Nominal Interest Rates Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-2 Turkey’s Inflation Rate: 1988–2001 Source: International Financial Statistics, http://ifs.apdi.net/imf/about.asp (accessed May 25, 2006) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-3 Real Loanable Funds Supply and Demand Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-4 Cause-and-Effect Relationships Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-5 Movement along the Real Loanable Funds Supply Curve Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-6 Causes of Real Money Supply Changes Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-7 Increases and Decreases in the Supply of Real Loanable Funds Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-8 Major Factors Affecting Households’ Supply of Real Loanable Funds *Remember that taxes have also affect the supply of real loanable funds through the government sector Only the effect on the household sector is shown in this exhibit Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-9 Major Factors Affecting Businesses’ Supply of Real Loanable Funds *Remember that taxes have also affect the supply of real loanable funds through the government sector Only the effect on the business sector is shown in this exhibit Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-20 Euro-Area Real Interest Rates and Trend Line Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-21 Effects of an Increase in the Real Money Supply Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-22 Effects of Speculative Capital Outflows Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-23 Effects of Increased Real GDP on the Real Risk-Free Interest Rate Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-24 Determinants of Expected Inflation and the Real Risk-Free Interest Rate Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-25 Do Central Banks Control the Real Risk-Free Interest Rate? Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-26 Three Major Macroeconomic Markets Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A9-1 Perfectly Mobile International Capital Markets Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A9-2 Perfectly Immobile International Capital Markets Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A9-3 Short-Term, Nominal Interbank Interest Rate Target Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A9-4 Long-Term Nominal Interbank Interest Rate Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A9-5 Central Bank Discretionary Adjustment Factor (Premium/Discount) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A9-6 Taylor Rule Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A9-7 Taylor Rule: Estimating the Taylor Rule for the United States, 1995–2006 Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A9-8 Federal Reserve’s Target Federal Funds Rate and Taylor Rule’s Predicted Federal Fund Rate Source: Federal Reserve Bank of St Louis, Economic Data—FRED, “Real Potential Gross Domestic Product,” http://research.stlouisfed.org/fred2/categories/118 (accessed May 27, 2006) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved ... a part of Cengage Learning All rights reserved Exhibit 9-8 Major Factors Affecting Households’ Supply of Real Loanable Funds *Remember that taxes have also affect the supply of real loanable... South-Western, a part of Cengage Learning All rights reserved Exhibit A9 -3 Short-Term, Nominal Interbank Interest Rate Target Copyright© 2008 South-Western, a part of Cengage Learning All rights... Major Factors Determining Nominal Interest Rates Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 9-2 Turkey’s Inflation Rate: 1988–2001 Source: International