In the Loanable Funds Market Model, ceteris paribus, it typically follows that when the federal government runs a budget deficit, there will be_ pressure on interest rates and pressure on private investment. This is referred to as Select one: O a. upward; upward; crowding out O b. upward; downward; crowding out c. downward; downward; financial intermediation d. downward; upward; financial intermediation.

In the Loanable Funds Market Model, ceteris paribus, it typically follows that when the federal government runs a budget deficit, there will be_ pressure on interest rates and pressure on private investment. This is referred to as Select one: O a. upward; upward; crowding out O b. upward; downward; crowding out c. downward; downward; financial intermediation d. downward; upward; financial intermediation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that the demand for loanable funds for car loans in the Milwaukee area is $12 million per month at an interest rate of 1O percent per year, $13 million at an interest rate of 9 percent per year, $14 million at an interest rate of 8 percent per year, and so on. If the supply of loanable funds is fixed at $18 million, what will be the equilibrium interest rate? Instructions: Enter your answer as a whole number. percent per year
4 Consider a small open economy with a perfectly elastic supply of savings at interest rate 7*, which is below the interest rate which would have prevailed in the economy if it could not have borrowed, and a normal investment curve. Show the market equilibrium, including the magnitude of foreign bon-owing. a Now show the effect of an increased budget deficit. b Show the effect of an increased budget deficit which originates as a result of increased public investment, in which the public investment is a complement to private investment.
True or False: Negative debt always carries a high interest rate and high fees. O True O False
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The diagram below show the market for financial capital assuming that national income is constant at potential GDP, Y*. Real Interest Rate I EL ME 14 FIGURE 25-2 NSO I 11 12 13 NS1 1 1 Quantity of Investment and Saving ($) Refer to Figure 25-2. Suppose national saving is reflected by NS, and investment demand is reflected by lo. Now suppose the government implements a revenue-neutral tax policy that encourages investment. What is the effect on the real interest rate? Select one: O a. There is no effect on NS or ID, and the interest rate remains at i*. O b. The real interest rate rises because of the decrease in the budget surplus. O C. National saving shifts to NS₁, and the real interest rate falls to i3. O d. Investment demand shifts to 1₁D, and the real interest rate rises to i₂. O e. The real interest rate falls because of the decrease in the budget surplus.
Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. B o A F S₁ D2 D1 Refer to Figure 26-3. Which of the following movements shows the effects of the government going from a budget deficit to a budget surplus? OA. a movement from Point A to Point B OB. a movement from Point B to Point A OC. a movement from Point A to Point F OD. a movement from Point C to Point B
When the interest rate rises, bond values O a. fall. O b. will either increase or decrease depending on the type of bond. are unchanged because the interest rate paid on a bond is fixed. O d. rise.
What caused the downturn, and eventual dissolution, of Long-Term Capital Management LP.? The 1997 Russian default caused a significant rise in U.S. Treasury Bonds, which LTCM was significantly short selling. O With the fall of the Soviet Union, Russia invested in the U.S. markets and destabilized the economy temporarily. O LTCM did not investments in Russian markets when they defaulted on their debts. OLTCM was lying to investors in an effort to inflate their stocks, which they then used to pay their employees in stock options.