Figure: Supply of Loanable Funds) Use Figure: Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the: Interest -ate (%) 12 10 8 6 4 2 S 0 10 20 30 40 50 60 70 80 90 Loanable funds (billions of dollars) O quantity of loanable funds supplied falls by $20 billion. O supply of loanable funds falls by $10 billion. quantity of loanable funds supplied rises by $20 billion. O supply of loanable funds rises by $20 billion.

Figure: Supply of Loanable Funds) Use Figure: Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the: Interest -ate (%) 12 10 8 6 4 2 S 0 10 20 30 40 50 60 70 80 90 Loanable funds (billions of dollars) O quantity of loanable funds supplied falls by $20 billion. O supply of loanable funds falls by $10 billion. quantity of loanable funds supplied rises by $20 billion. O supply of loanable funds rises by $20 billion.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Figure 32-1 percent 8 10 20 30 40 50 60 70 $billions Refer to Figure 32-1. In the Figure shown, if the real interest rate is 6 percent, the quantity of loanable funds demanded is O A. $20 billion, and the quantity supplied is $40 billion. O B. $20 billion, and the quantity supplied is $60 billion. O C. $60 billion, and the quantity supplied is $20 billion. O D. $60 billion, and the quantity supplied is $40 billion.
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What happens to happens to the annual payment on a loan as the term of the loan increases? O It stays the same It decreases It increases
Question 1 A Collage student borrowed $5,000 on August 1 from the bank and must repay a total of $5,300 on July 31st of next year. Determine the interest amount. O a. $5,000 O b.$5,350 Oc. $ 350 O d.$ 300
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14) What could explain what is happening in the graph to the right? a. The government has given investors an investment tax credit, increasing investors appetite for savings. b. The government has removed the tax protected status of IRA accounts, increasing savings. c. The government balances the interest rate Το r1 Eo E1 So $1 budget reducing its debt, and the "crowding out" effect disappears. business desire to obtain funds. 90 91 quantity of loanable funds d. A new technology makes industry much more productive, therefore increasing e. There are many things that could explain what the graph shows us, but we don't have enough information to decide on any of a. thru d. above.
4. Suppose gross saving in the United States is 20 percent of Gross National Product (GNP). a. If business saving is 15 percent of GNP and government saving is 4 percent of GNP, what percent of GNP is personal saving?b. Explain why a federal budget surplus increases national saving while a budget deficit decreases national saving.c. How can a federal budget deficit increase market equilibrium interest rates and reduce private investment and future economic growth?
1---consider a consumer who earns income each month. person has to spend each month on essential goods, such as food and personal. person has no access to reliable savings, so person must spend her entire income each month. The consumer is interested in taking a loan to finance a large purchase. The cost of capital for banks is fixed at each month and the monthly interest rate charged to borrowers is . Both and are equal to one plus the interest rate as we are used to seeing it – e.g., if a loan charges 5% monthly interest, then = 1.05 2---What is the largest nonessential purchase that the consumer can make each month without borrowing? Express it as a function of y c 3--Under the zero profit condition for lenders (i.e. banks), what will the interest rate charged to borrowers be? Assume there is no risk of default and no fixed costs and express it as a function of(capital k), y,c 4--What is the borrower’s monthly disposable income (exclusive of essential purchases) with a loan, under…
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
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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. (?)
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