In the summer of 2010, Congress passed a far-reaching financial reform bill to attempt to prevent another financial crisis like the one that happened in 2008-2009. We will consider two scenarios related to this bill. 18. In the first scenario, suppose that by requiring firms to comply with strict regulations, the bill increases the cost of investment. Draw a graph showing the consequences of this scenario on the market for loanable funds. What is the result? 19. Now consider the second scenario: Suppose that by requiring firms to comply with strict regulations, the bill increases confidence that savers have with the financial system, making them more likely to save their money there. Draw a graph showing the consequences of this scenario on the market for loanable funds. In this scenario, which curve shifts, and what are the results?

In the summer of 2010, Congress passed a far-reaching financial reform bill to attempt to prevent another financial crisis like the one that happened in 2008-2009. We will consider two scenarios related to this bill. 18. In the first scenario, suppose that by requiring firms to comply with strict regulations, the bill increases the cost of investment. Draw a graph showing the consequences of this scenario on the market for loanable funds. What is the result? 19. Now consider the second scenario: Suppose that by requiring firms to comply with strict regulations, the bill increases confidence that savers have with the financial system, making them more likely to save their money there. Draw a graph showing the consequences of this scenario on the market for loanable funds. In this scenario, which curve shifts, and what are the results?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The following tables present a hypothetical economy's data on the relationship between various real interest rates and sector-specific supply and demand for loanable funds, where the currency is the U.S. dollar. Real Interest Rate (Percent) 7 6 5 43 2 Real Interest Rate (Percent) 7 6 5 3 2 Household Supply (Billions of dollars) 55 50 40 35 30 25 Household Demand (Billions of dollars) 15 25 40 50 55 70 Business Supply (Billions of dollars) 55 50 25 25 20 in Business Demand (Billions of dollars) 5 15 25 40 45 60 Federal Government Supply (Billions of dollars) ssssss 5 5 5 5 5 5 Federal Government Demand (Billions of dollars) 555555 Foreign Investor Supply (Billions of dollars) 55 50 25 25 15 10 Foreign Investor Demand (Billions of dollars) 24498 10 15 25 40 50 60 Municipal Government Supply (Billions of dollars) 30 25 15 15 10 5 Municipal Government Demand (Billions of dollars) 5 10 15 20 25 30
Let's say that due to political turmoil in the US and abroad, people all over the world start to lose confidence in American securities. Both Americans and foreigners prefer to do their financial investment elsewhere. As a result, we'd expect the supply of loanable funds to shift to the right and the real interest rate to fall the supply of loanable funds to shift to the left and the real interest rate to rise the supply of bonds to shift to the right and the real interest rate to fall the supply of bonds to shift to the left and the real interest rate to rise
Suppose that the government puts out a tax incentive that encourage people to save more money. Assume that this does not lead to a change in Y* or G, but does lead to a decrease in Consumption. 7. What would we expect to happen to interest rates? Explain your answer. 8. Would this change in interest rates increase or decrease the present value (PV) of the investment that this question is considering? Explain your answer.
Solve it clearly
Most Australians are found to be frugal during the coronavirus pandemic and have started saving more. Explain how an increase in household saving affects the equilibrium interest rate and the equilibrium quantity of loanable funds.
In the standard loanable funds market graph, … …an increase in the supply of loanable funds (rightward shift)... Group of answer choices A) none of the other options. B) could be caused by a tax increase for individuals on interest earned from savings accounts. C) would cause an increase in the real interest rate. D) could be caused by a tax break for businesses on investment spending. E) would cause a decrease in the real interest rate.
Question 7 Refer to the following graph to answer the following questions: Line 1 Vertical Axis C Horizontal Axis a shift from line 1 to line 4. movement from B to A a shift from line 2 to line 3 D Assuming the figure represents the market for loanable funds, which of the following would represent a cut in corporate tax rates, causing business owners and managers to become more optimistic? movement from A to B a shift from line 3 to line 2 Line 4 Line 2 Line 3 Ⓡ
(Figure: Market for Loanable Funds 2) Based on the graph, if business taxes increase, the demand for loanable funds curve will shift from to and the new equilibrium will be at point holding supply constant at So. So Real Interest Rates (%) Do; D₁; c Do; D₁; b D₁; Do; a a b Loanable Funds ($) d S₁ Do D₁
Which statement is TRUE regarding financial capital?
The presence of a well developed financial market and a wide array of financial instruments is beneficial to the overall economy since the flow of funds would be greater. * True or False?
Explain what the Global Investment Performance Standards (GIPS) are and carefully discuss three (3) reasons why they are needed. To be GIPS compliant, firms must adhere to all sections of the provisions within the GIPS standards. List and briefly explain (4) four provisions.
Amid the global pandemic, economic activity in many countries in the world has decreased substantially causing a significant reduction in tax revenues. Mexico projects a budget deficit of $20 billion dollars next year. The government of Mexico borrows $20 billion more next year than this year from the market for loanable funds. Answer both parts below assuming that Mexico is a closed economy. a) Use a diagram for the market for loanable funds to analyze this policy. Does the interest rate rise or fall? What happens to investment and national saving? Note: make sure you label your diagram properly. b) Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. What does this belief do to private saving and the supply of loanable funds today? Does this change the results you discussed in part (a)?