(a) An investor deposits $ 8,000 in a savings account that earns 8% simple interest in a year. How any years will it take to double the balance in the account? If, instead, the investor has the alternative to place the deposit in an account that earns 7% interest compounded annually, how many years will it take to double the deposited fund?
(b) What factors determine nominal interest rate and real interest rate? Examine, using appropriate graphical illustration, how each of the following effects either nominal or real interest rate:
(i) An increase in money supply by the FED.
(2) A weak demand for investment goods
(3) An upsurge in the desire to save more in the economy
(4) An increase in the use of cash following a wave of credit card fraud.