Adjust the graph to show how a $25.8 billion dollar increase n the government's budget deficit affects the hypothetical oanable funds market below, holding all else equal. Market for Loanable Funds Select the answer that describes the adjustment in the loanable funds market. O The deficit decreases the demand for loanable funds and shifts the demand curve to the left; decreasing the interest rate and crowding out investment spending. O The deficit decreases national savings and shifts the supply curve to the left; increasing the interest rate and crowding out investment spending. O The deficit increases the demand for loanable funds and D shifts the demand curve to the right; increasing the Interest rate

Adjust the graph to show how a $25.8 billion dollar increase n the government's budget deficit affects the hypothetical oanable funds market below, holding all else equal. Market for Loanable Funds Select the answer that describes the adjustment in the loanable funds market. O The deficit decreases the demand for loanable funds and shifts the demand curve to the left; decreasing the interest rate and crowding out investment spending. O The deficit decreases national savings and shifts the supply curve to the left; increasing the interest rate and crowding out investment spending. O The deficit increases the demand for loanable funds and D shifts the demand curve to the right; increasing the Interest rate

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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According to how we model the Loanable Funds market in Ch. 6 (considering household savings and taking (T – G) as government’s net ‘saving,’ which could be negative it there were a budget deficit), which of the following shifts the Supply of Loanable Funds curve to the left? (T = taxes; G = government spending.) Group of answer choices A) higher tax rates on business investment spending B) a change in tastes toward consuming less C) higher budget deficit D) change in tastes toward saving more E) lower budget deficit
The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumerswill be affected if the budget deficit increases to $250 billion per year. Draw a graphto show your conclusion. b. Assuming taxpayers do not anticipate an increase in the future market rate of interestdue to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds. c. How would your conclusion differ if taxpayers fully anticipate future tax increases to offset the increase in the budget deficit? d. Do you think the Ricardian Equivalence is realistic?
Draw the graph of the effect on the equilibrium in the loanable funds market when corporate taxes increase. Does the demand for loanable funds increase or decrease? Does the interest rate increase of decrease?
Suppose government provides tax rebate to small business on their business-related expenditure. Assuming no change in government budgetary position, this policy is likely to have a positive effect on household (or private) saving in the economy (Hint: think about the effect of this policy in Loanable Funds Market) Is this statement true, false or uncertain? Please provide your explaination.
There is $10 trillion in the loanable funds market. $6 trillion in private borrowing and $4 trillion in government borrowing. The federal government increases its borrowing to $5 trillion, crowding out $1 trillion in private borrowing. Interest rates remain the same. Make an argument that the GDP remains the same and that we don’t care about the crowding out.
please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumers will be affected if the budget deficit increases to $250 billion per year. b. Assuming taxpayers do not anticipate an increase in the future market rate of interest due to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds. c. How would your conclusion differ if taxpayers fully anticipate future tax increases to offset the increase in the budget deficit? d. Do you think the Ricardian Equivalence is realistic?
Refer to the figure below to answer the following questions. Real interest rate (percent per year) CON 6 5 4 3 2 1 0 H H Select one: DLF₂ DLFO 0.5 1.0 1.5 2.0 Loanable funds (trillions of 2002 dollars) DLF₁ Refer to Figure 23.2.2. In Figure 23.2.2, a decrease the real interest rate will result in a movement from point E to A. point F. B. point G. C. point H. D. point. O E. either point G or point F. Figure 23.2.2
During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would shift: a. the demand for loanable funds left and shift the supply of dollars in the market for foreign-currency exchange right. b. both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange right. c. both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange left. d. the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange left.
A small nation in an attempt to boost its economy decides to build a bridge. The bridge costs $70 million to build, which the government needs to borrow. Before the government borrows the money the equilibrium amount of loanable funds in the economy is $350 million and the equilibrium interest rate is 8%. After the government borrows the money the equilibrium amount of loanable funds in the economy is $390 million and the equilibrium interest rate is 12%. Please show on the loanable funds graph the effect of the government taking out the $70 million loan. What happens to AD as a result of the government taking out the loan and why? Please specify what happens to consumption, investment, and government spending.