interest rates, which leads toinvestment and economic growth.A tax law change that successfully encourages saving willTo better understand how changes in tax laws can affect saving, suppose that Fatima, a rising third-year in college, plans to save $550 from hersummer job in order to buy textbooks for the upcoming fall semester. Fatima's parents are so impressed with her plans that they offer to pay her anadditional 30% interest per month on the money she saves, which means that Fatima is now earning a large rate of return on her saving. By the endof the summer, it turns out that Fatima saved $600 (before the interest paid by her parents) from her job. This means that theeffect must be bigger than theeffect for Fatima in this case. 6. Tax systems and savingThis question addresses the impact of saving on an economy by examining what happens if tax laws change to induce saving and how changes in taxlaws can discourage saving.The following graph shows the market for loanable funds.Show the impact of a change in the tax law that successfully encourages saving by shifting either the demand curve (D), the supply curve (S), orboth.INTEREST RATELOANABLE FUNDSSD

In the market for loanable funds, interest rates are determined by supply and demand. The demand for…

6. Tax systems and saving This question addresses the impact of saving on an economy by examining what happens if tax laws change to induce saving and how changes in tax laws can discourage saving. The following graph shows the market for loanable funds. Show the impact of a change in the tax law that successfully encourages saving by shifting either the demand curve (D), the supply curve (S), or both. INTEREST RATE LOANABLE FUNDS

6. Tax systems and saving This question addresses the impact of saving on an economy by examining what happens if tax laws change to induce saving and how changes in tax laws can discourage saving. The following graph shows the market for loanable funds. Show the impact of a change in the tax law that successfully encourages saving by shifting either the demand curve (D), the supply curve (S), or both. INTEREST RATE LOANABLE FUNDS

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. The market for loanable funds and government policy The following graph shows the loanable funds market. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Consider each scenario separately by returning the graph to its starting position when moving from one scenario to the next. (Note: You will not be graded on any changes you make to the graph.) INTEREST RATE (Percent) Supply LOANABLE FUNDS (Billions of doll Demand -0- Demand 10 Supply
Based on this model, the budget deficit leads to in the level of investment and in the interest rate. Which of the following arguments might a supporter of a balanced budget make in defense of their position? Check all that apply. An individual's share of the government debt represents only a small portion of his or her lifetime earnings. Budget deficits decrease national saving. Budget deficits increase national saving. Budget deficits place a burden on future taxpayers. Supporters of a balanced budget claim that the government's budget deficit cannot grow forever, but critics believe that this is not necessarily true. They argue that what matters is the size of debt relative to national income. For example, suppose that real output in the United States grows at approximately 6%. If the inflation rate is 3% per year, this means that nominal income must be growing at a rate of % per year. Because nominal income grows over time, the nation's ability to pay back the national debt than…
Interest Rate% 12% 10% 8% 6% 4% 2% 0 5 10 15 20 25 30 35 40 45 50 Supply of Savings Select one: a. The economic dips into a recession and firms see profits fall b. Firms become more optimistic about their expected profits c. An increase in business taxes d. A decrease in household wealth Quantity of loanable funds (billions) Refer to the graph above. Which of the following would cause interest rates to increase? Ti Demand for Borrowing
41. Suppose that government institutes an investment tax credit and such policy generates an increase in the government budget deficit. This would: a. shift the saving curve (i.e. supply of loanable funds) to the left. b. cause the real interest rate to fall.
1) Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if: a reduction in military spending moves the government’s budget from deficit into surplus. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
4. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. INTEREST RATE (Percent) 10 9 1 0 0 Supply Demand 100 200 300 400 500 600 700 800 900 1000 LOANABLE FUNDS (Billions of dollars) ? is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied Suppose the interest rate is 4.5%. Based on the previous graph, quantity of loanable funds supplied is demanded, resulting in a of loanable funds. This would encourage lenders to the quantity of loanable funds supplied and the equilibrium interest rate of % than the quantity of loans the interest rates they charge, thereby the quantity of loanable funds demanded, moving the market toward
Mj
6. Tax systems and saving This question addresses the impact of saving on an economy by examining what happens if tax laws change to induce saving and how changes in tax laws can discourage saving. The following graph shows the market for loanable funds. Show the impact of a change in the tax law that successfully encourages saving by shifting either the demand curve (D), the supply curve (S), or both. INTEREST RATE LOANABLE FUNDS S 6.4. (?)
8 Demand, Supply 7 10 4 REAL INTEREST RATE (Percent) 3 2 - 10 20 30 40 50 60 70 80 QUANTITY OF LOANABLE FUNDS (Billions of dollars) Refer to Figure 33-1. If the real interest rate is 3 percent, the quantity of loanable funds demanded is $50 billion, and the quantity supplied is $30 billion. $20 billion, and the quantity supplied is $60 billion. $50 billion, and the quantity supplied is $60 billion. $30 billion, and the quantity supplied is $50 billion.
5. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) INTEREST RATE (Percent) Supply Demand LOANABLE FUNDS (Billions of dollars) Demand Supply (?) Scenario 1: Individual Retirement Accounts (IRAS) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Now suppose there is a decrease in the maximum contribution, from $5,000 to $3,000 per year.
4. The market for loanable funds and government policy The following graph shows the loanable funds market. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Consider each scenario separately by returning the graph to its starting position when moving from one scenario to the next. (Note: You will not be graded on any changes you make to the graph.) Supply 17 INTEREST RATE (Percent) LOANABLE FUNDS (Billions of dollars) Demand Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 18%. Now suppose there is an increase in the tax rate on interest income, from 18% to 22%. Shift the appropriate curve on the graph to reflect this change. The repeal of the previously existing tax credit causes the interest rate to Shift the appropriate curve on the graph to reflect this change. This change in the tax…
60)In the Table below, what is the value of saving? Disposable Income Consumption Saving $11,400 $7,500 ? Select one: a. 18,900 b. 3,900 c. Cannot be calculated