According to the basic loanable funds model, all else equal, a rise in government spending will: cause output to rise. cause real interest rates to rise. cause savings to rise. cause investment to rise.
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![According to the basic loanable funds model, all else equal, a rise in government spending will:
cause output to rise.
cause real interest rates to rise.
cause savings to rise.
cause investment to rise.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fec196d58-d2c2-4dca-b3b7-feec6a7a50a9%2Fc38b1bd6-9d4a-4675-ac9d-a6724afb8b4b%2Fq0dtdc_processed.png&w=3840&q=75)
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- LOANABLE FUNDS Based on this model, the budget deficit leads to D 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. Budget deficits decrease national saving. Budget deficits increase national saving. An individual's share of the government debt represents only a small portion of his or her lifetime earnings. Budget deficits crowd out private investment. 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 3%. 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…Economists who favour balanced budgets argue that increases in government spending, without any corresponding increase in taxes, will have a certain effect in the market for loanable funds. Modify the graph to show this effect. Real interest rate demand X Quantity of loanable funds As a result, this impact on the market for loanable funds reduces imports. labour productivity. capital inflows. domestic investment.Justify for the correct option
- Economists that favor balanced budgets warn against increases in government spending without a corresponding increase in taxes. Modify the graph to illustrate effect of this change to the public budget on the market for loanable funds, according to these economists. Real interest rate Demand Supply X Quantity of loanable funds Select all of the factors that will be reduced as a result of this change in the public budget. labor productivity domestic investment imports capital inflowsWhich event could be expected to shift a nation's demand for loanable funds, as shown in the accompanying graph? Interest rate Investment an increase in the productivity of capital a decrease in investor confidence a decrease in consumer wealth an increase in time preferences a drop in the number of retired workersWhich of the following would result in an increase in the equilibrium real interest rate and a decrease in the quantity of loanable funds in the loanable funds framework? Group of answer choices The tax code is reformed to encourage greater investment. The tax code is reformed to encourage greater saving. The government starts running a budget deficit. The tax code is changed in a way that discourages investment.
- Please answer fastUsing a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if a) a reduction in military spending moves the government's budget from deficit into surplus. b) the government raises its tax on corporate profits. Other tax changes also are made, such that the government's deficit remains unchanged. c) a rise in life span of Americans.Collaboration with Congress during the Clinton administration allowed for an aggressive deficit‑cutting plan to pass. At the end of the 1990s, Congress eliminated the government deficit. Manipulate the graph to illustrate how the elimination of the deficit affects the loanable funds market. look at image for graph What does the model predict will happen to the quantity of private investment as a result of elimination of the government deficit? Private investment will increase because the cost of borrowing increases. decrease because the cost of borrowing increases. decrease because the cost of borrowing decreases. increase because the cost of borrowing decreases.
- are my answers correct?Collaboration with Congress during the Clinton Administration allowed for an aggressive deficit-cutting plan to pass. As a result, the government was able to reach a balanced budget at the end of the 90's. Move the supply and/or demand curves to describe the expected effect that this deficit-reduction likely had upon the loanable funds market. As a result, private investment should have a) decreased as the cost of borrowing increased. b) increased as the cost of borrowing increased. c) increased because the cost of borrowing decreased. d) decreased as the cost of borrowing decreased.Figure 26-5. Figure 26-5 shows the loanable funds market for a closed economy. Interest Rate 7% 6% 5% D S $75 $100 $125 Loanable Funds Refer to Figure 26-5. Starting at point A, a reduction in government spending would cause a) the quantity of loanable funds traded to increase to $125 and the interest rate to fall to 5% (point D). b) the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to 7% (point E). c) the quantity of loanable funds traded to increase to $125 and the interest rate to rise to 7% (point C).
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