Interest Rate answer the following question: Quantity Suppose the loanable funds market is initially in equilibrium at point A, but then implementation of fiscal policy causes crowding out to occur After the implementation occurs, the equilibrium in the market would be best represented by

Interest Rate answer the following question: Quantity Suppose the loanable funds market is initially in equilibrium at point A, but then implementation of fiscal policy causes crowding out to occur After the implementation occurs, the equilibrium in the market would be best represented by

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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27) What is the most likely impact of an increase in the government budget deficit on the market for loanable funds? a) Overall demand for loanable funds decreases. b) Overall supply of loanable funds increases. c) Real interest rates fall. d) Private investment spending decreases.
Indicate the Quantity demanded and Quantity supplied of loanable funds if the Interest rates increases by 2% (from the equilibrium rate). would changed in interest rate cause a movement along the curve or shift? Interest rate 24% 22 20 ' 18 16 14 12 10 a 6 4 2 Y S ° $200 $400 600 D 800 1,000 1,200 Quantity of leanable funds (billions of dollars) Indicate the Quantity demanded and Quantity supplied of loanable funds if the Interest rates increases by 2% (from the equilibrium rate). would changed in interest rate cause a movement along the curve or shift?
Economists who favour balanced budgets argue that increases in government spending, without any corresponding increase in taxes, will have a certain effect in the market for loanable funds. Modify the graph to show this effect. Real interest rate demand X Quantity of loanable funds As a result, this impact on the market for loanable funds reduces imports. labour productivity. capital inflows. domestic investment.
Suppose Indian government borrows 50,000/- more next year than this year. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the 50,000/- of extra government borrowing.
According to the "Yes - Markets Self-Adjust" camp, money allows savings to flow easily through the loanable funds market to facilitate business borrowing for investment spending. Select one: True False
Suppose the government decides to borrow money. The equilibrium interest rate will _____ and the total amount borrowed will _____
The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumerswill be affected if the budget deficit increases to $250 billion per year. Draw a graphto show your conclusion. b. Assuming taxpayers do not anticipate an increase in the future market rate of interestdue to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds. c. How would your conclusion differ if taxpayers fully anticipate future tax increases to offset the increase in the budget deficit? d. Do you think the Ricardian Equivalence is realistic?
Draw the graph of the effect on the equilibrium in the loanable funds market when corporate taxes increase. Does the demand for loanable funds increase or decrease? Does the interest rate increase of decrease?
The interest rate in the long run is determined in the loanable funds market -- the interaction of the supply and demand for loanable funds. True False
Justify for the correct option
Suppose government provides tax rebate to small business on their business-related expenditure. Assuming no change in government budgetary position, this policy is likely to have a positive effect on household (or private) saving in the economy (Hint: think about the effect of this policy in Loanable Funds Market) Is this statement true, false or uncertain? Please provide your explaination.
(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. An increase in private savings will shift the supply curve for loanable funds to the Interest rate causing the interest rate to r* = 6% E Supply