gure: Loanable Funds erest ate 6% S D $100 Quantity of loanable fund (billions of dollars n the loanable funds market exhibite ew equilibrium quantity of loanable The government eliminates taxe Profit expectations for business i Capital inflows from foreign citi The federal government runs a b
gure: Loanable Funds erest ate 6% S D $100 Quantity of loanable fund (billions of dollars n the loanable funds market exhibite ew equilibrium quantity of loanable The government eliminates taxe Profit expectations for business i Capital inflows from foreign citi The federal government runs a b
Chapter1: Making Economics Decisions
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Transcribed Image Text:stolt 8 01 10
Macmillan Learning
Figure: Loanable Funds
Interest
rate
0
$100
Quantity of loanable funds
(billions of dollars)
In the loanable funds market exhibited above, which scenario might produce a new equilibrium interest rate of 8% and a
new equilibrium quantity of loanable funds of $75 billion?
The government eliminates taxes on income from interest earned.
Profit expectations for business investments become less optimistic.
Capital inflows from foreign citizens decline.
The federal government runs a budget deficit, rather than a surplus.

Transcribed Image Text:Interest
rate
0
S
X
$100
Quantity of loanable funds
(billions of dollars)
In the loanable funds market exhibited above, which scenario might produce a new equilibrium interest rate of 8% and a
new equilibrium quantity of loanable funds of $150 billion?
The federal government has a budget surplus, rather than a budget deficit.
Businesses become more optimistic about the return on investment spending.
There is an increase in capital inflows from other nations.
Consumption as a fraction of disposable income increases.
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