For each of the given scenarios, use the graphs to (1) show what happens in the market for loanable funds and (2) help answer the questions that follow. Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at depository institutions. Initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. Now suppose there is a decrease in the tax rate on interest income, from 20% to 15%. ? INTEREST RATE Market for Loanable Funds LOANABLE FUNDS This change causes savers to supply quantity of loanable funds demanded, there is 0 0 0 * loanable funds. Because the quantity of loanable funds supplied is now pressure on interest rates. This change in interest rates causes a(n) in the quantity of loanable funds demanded. the

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4. Factors that affect equilibrium in the market for loanablefunds
For each of the given scenarios, use the graphs to (1) show what happens in the market for loanable funds and (2) help answer the questions that
follow.
Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at depository institutions. Initially, the interest income earned on
bonds or deposits is taxed at a rate of 20%. Now suppose there is a decrease in the tax rate on interest income, from 20% to 15%.
?
INTEREST RATE
Market for Loanable Funds
SN
LOANABLE FUNDS
This change causes savers to supply
quantity of loanable funds demanded, there is
ܘ ܘ ܘ
loanable funds. Because the quantity of loanable funds supplied is now
pressure on interest rates. This change in interest rates causes a(n)
in the quantity of loanable funds demanded.
the
Transcribed Image Text:4. Factors that affect equilibrium in the market for loanablefunds For each of the given scenarios, use the graphs to (1) show what happens in the market for loanable funds and (2) help answer the questions that follow. Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at depository institutions. Initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. Now suppose there is a decrease in the tax rate on interest income, from 20% to 15%. ? INTEREST RATE Market for Loanable Funds SN LOANABLE FUNDS This change causes savers to supply quantity of loanable funds demanded, there is ܘ ܘ ܘ loanable funds. Because the quantity of loanable funds supplied is now pressure on interest rates. This change in interest rates causes a(n) in the quantity of loanable funds demanded. the
Scenario 2: An investment tax credit effectively lowers the taxes paid by firms that purchase new equipment or build a new manufacturing facility.
Suppose the government implements a new investment tax credit.
INTEREST RATE
Market for Loanable Funds
causes a(n)
S
LOANABLE FUNDS
DA
The implementation of a new tax credit causes borrowers to demand
the quantity of loanable funds supplied, there is
in the quantity of loanable funds supplied.
0 5 0 5
A
?
loanable funds. Because the quantity of loanable funds demanded is now
pressure on interest rates. This change in interest rates
Transcribed Image Text:Scenario 2: An investment tax credit effectively lowers the taxes paid by firms that purchase new equipment or build a new manufacturing facility. Suppose the government implements a new investment tax credit. INTEREST RATE Market for Loanable Funds causes a(n) S LOANABLE FUNDS DA The implementation of a new tax credit causes borrowers to demand the quantity of loanable funds supplied, there is in the quantity of loanable funds supplied. 0 5 0 5 A ? loanable funds. Because the quantity of loanable funds demanded is now pressure on interest rates. This change in interest rates
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