If Japan goes from a small budget deficit to a large budget deficit, it will reduce A. public saving and so shift the supply of loanable funds left. B. None of the above is correct. C. investment and so shift the demand for loanable funds left. D. private saving and so shift the supply of loanable funds left.

If Japan goes from a small budget deficit to a large budget deficit, it will reduce A. public saving and so shift the supply of loanable funds left. B. None of the above is correct. C. investment and so shift the demand for loanable funds left. D. private saving and so shift the supply of loanable funds left.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 9P

See similar textbooks

Similar questions

What do loanable funds finance? What is the source of loanable funds? Loanable funds finance _______. A. business investment, the government budget surplus, and international borrowing B. business investment, the government budget deficit, and international investment or lending C. private saving, the government budget surplus, and international borrowing D. private saving, the government budget deficit, and international investment or lending
When the government budget deficit rises, national saving is reduced, interest rates rise, and investment falls. Select one: a. True b. False
Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S. a. fell. The increased saving would increase the quantity of loanable funds demanded.b. fell. The increased saving would increase the quantity of loanable funds supplied.c. rose. The increased saving would increase the quantity of loanable funds demanded.d. rose. The increased saving would increase the quantity of loanable funds supplied.
If foreign income and wealth decrease, this would most likely a. not affect the market for loanable funds. b. cause the supply of loanable funds to increase. c. cause the supply of loanable funds to decrease. d. cause the demand for loanable funds to increase in order for foreigners to maintain consumption. e. cause the demand for loanable funds to decrease.
a. Consider the Market for Loanable Funds in a closed economy. What would be the impacts of the following events on interest rates and investment. i. The government introduces a tax credit for savings accounts of up to $10,000 per year. ii. The government introduces a tax credit for savings accounts of up to $10,000 per year, and at the same time it repeals an investment tax exemption provision. iii. The government raises the tax rates. iv. The government issues bonds worth $10 billion. b. In a closed economy GDP = $1,400, private saving = $225, government budget deficit = $15, and government spending $25 (all numbers are in billions). Calculate national saving, taxes, and consumption. %3D
Supply 6 D1 D2 Consider the loanable funds market outlined above. Which of the following could explain a shift from D1 to D2? a. Firms increase their purchases of new equipment due to heightened market optimism about the future. b. The government increases taxes, resulting in a budget surplus. C. A new tax law is introduced which encourages people to save less and consume more. d. A new tax law is introduced which encourages people to save more and consume less.
If at a given real interest rate desired national saving is $115 billion, domestic investment is $60 billion, and net capital outflow is $40 billion, then at that real interest rate in the loanable funds market there is a A. surplus. The real interest rate will fall. B. surplus. The real interest rate will rise. C. shortage. The real interest rate will rise. D. shortage. The real interest rate will fall.
6.
Use the analysis for the market for loanable funds diagram to illustrate and explain how the following government policy affects the economy’s saving and investment. Policy 1: Suppose the government starts with a balanced budget and then, because of a tax cut or spending increase, starts running a budget deficit.State, explain and draw the loanable funds diagram for i,ii and iii. (i) which which loanable funds curve would this policy affect?(ii) which way would the loanable funds curve shift?(iii) what would be the the impact on interest rates?
The explanation for the slope of the A. supply of loanable funds curve is based on the logic that a higher real interest rate leads to lower saving. B. supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving. C. demand for loanable funds curve is based on the logic that a higher interest rate leads to higher saving. D. demand for loanable funds curve is based on the logic that a higher interest rate leads to lower saving.
Suppose the long-term real interest falls. In the (private sector) loanable funds market. the result will be. a. the demand for loanable funds curve shifts to the right b. the supply of loanable funds curve shifts to the left c. the demand for Ioanable funds curve does not shift to the right nor does the supply of loanable funds cunve shift to the left d. the demand for loanable funds curve shifts to the right and the supply of loanable funds curve shifts to the left
The demand for loanable funds has a ________ slope because the lower the interest rate, the ________ number of investment projects are profitable, and the ________ the quantity of loanable funds demanded. A. negative; lesser; greater B. positive; lesser; lesser C. negative; greater; greater D. positive; greater; greater E. negative; greater; lesser QUESTION 14 The statement "This Dell laptop costs $1,200" illustrates which function of money? A. Liquidity. B. Medium of exchange. C. Standard of deferred payment. D. Store of value. E. Unit of account.