How the following events affect interest rates? Be clear in your answer.1. An earthquake destroys bridges and roads in Turkey, leading to increasedinvestment spending for rebuilding the infrastructure.2. Future taxes of businesses are expected to be increased.3. Corona pandemic is forcing people to stay home to protect themselves andspend less money than usual.4. The government proposes a new tax on savings.

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Answered: 1. An earthquake destroys bridges and…

1. An earthquake destroys bridges and roads in Turkey, leading to increased investment spending for rebuilding the infrastructure.

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter6: Saving And Investing

Section: Chapter Questions

Problem 26AA

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How does an increase in interest rates affect business? Consumers?
Manipulate the graph to show what will happen to supply and demand in the market for loanable funds when the government budget deficit increases, changing the equilibrium quantity of loanable funds by 3 percentage points. Ceteris paribus, what is the new interest rate? interest rate: 6 Ceteris paribus, private investment would decrease. not change. increase. % Interest rate (%) 10 9 8 7 6 4 3 2 1 0 0 Supply 6 Demand 2 4 6 8 10 12 14 16 18 20 22 24 26 28 Quantity of loanable funds (% of GDP)
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