Macro Econ Assume an economy is in a recession and the government increases deficit spending. Draw the market for loanable funds and identify what will happen to the real interest rates and the quantity of loans.
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- Show the effect on the real interest rate and equilibrium quantity of loanable funds of a decrease in the demand for loanable funds and a smaller decrease in the supply of loanable funds. Draw a demand for loanable funds curve. Label it DLF0. Draw a supply of loanable funds curve. Label it SLF0. Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF1. Draw a curve that shows a smaller decrease in the supply of loanable funds. Label it SLF1. Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2.↑ Match each of the following scenarios with the appropriate graph of the market for loanable funds. NEAL Loanable funds Loanable funds 292 D₁ D₂ Loanable funds Loanable funds a. An increase in the real interest rate results in only a small increase in private saving by households. This matches graph b. A decrease in the real interest rate results in a substantial increase in spending on investment projects by businesses. This matches graph c. The federal government eliminates RRSPs and TFSAS (tax-deductible retirement accounts). This matches graph d. The federal government reduces the tax on corporate profits. (Assume no change in the federal budget deficit or budget surplus.) This matches graphIn which year was water the most expensive in real terms? Show work. What was the real wage for Jakku’s minimum wage of $8.25 in 2014? Evaluate Jakku’s economic health. You must cite results from your previous calculations. Consider the market for loanable funds and assume that market is in equilibrium. Suppose that the overall income levels increase. Describe the initial effect, how the market adjusts, and how equilibrium is affected.
- How does an increase in disposable income change the equilibrium in the loanable funds market? An increase in disposable income _______ the equilibrium real interest rate and _______ the equilibrium quantity of loanable funds. A. raises; increases B. lowers; increases C. raises; decreases D. lowers; decreasesThe table shows the demand for loanable funds schedule and the supply of loanable funds schedule when the government budget is balanced. Loanable funds Loanable funds demanded Real interest rate (percent per year) supplied If the govemment budget surplus is $1.0 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving? (trillions of 2009 dotlars per year) 8.0 6.0 7.5 6.5 If the government budget surplus is $1.0 trillion, the real interest rate is percent a year. 7.0 7.0 6.5 75 If the government budget surplus is S1.0 trillion, the quantity of investment is S trillion, and the quantity of private saving is $ trillion. 6.0 8.0 5.5 8.5 10 5.0 9.0of stion 10 8 than $ t 2 0 interest rate (percent per year) 100 200 300 400 500 600 Loanable funds (billions of 2020 dollars) DLF The real interest rate is 5 percent a year and the economy is on curve DLF. The expected profit falls. With no change in the real interest rate, the new quantity of loanable billion. 13-02-2 20 E 25 OS demanded is 2011 1000 MANAMA L Time lef
- What is the effect of a fall in the real interest rate on the demand for loanable funds? A fall in the real interest rate _______. A. decreases the demand for loanable funds and shifts the demand curve leftward B. decreases the quantity of loanable funds demanded up along the demand curve C. increases the demand for loanable funds and shifts the demand curve rightward D. increases the quantity of loanable funds demanded down along the demand curve Thanks!Suppose the government borrows $20 million more next year than this year. Answer questions d and ea. Draw and fully label a diagram to illustrate the market for loanable fund to analyzethis policy.b. Does the rate of interest rise or fall? c. What happens to investment? To private savings? To public savings? To nationalsavings? d. How does the elasticity of the supply of loanable funds affect the size of thesechanges? e. How does the elasticity of the demand of loanable funds affect the size of thesechanges?Complete the following statements. a. Dan saves a portion of his income in an interest-earning account. In the loanable funds market, Dan is b. John owns a pizzeria and needs to borrow money for a new oven. In the loanable funds market, John is c. Savers like Dan are likely to save more when the real interest rate . Therefore, the supply of loanable funds Look at images for word bank . d. Borrowers like John are likely to borrow more when the real interest rate . Therefore, the demand for loanable funds .
- The French Government runs a budget surplus to finance its expenditure. Use the loanable funds model to show what happens to the interest rate, investments, and the quantity of loanable funds.The graph shows the private demand for loanable funds curve and the supply of loanable funds curve. Draw a curve that shows the effect on the loanable funds market when the government has a budget deficit. Label it C₁. Draw a curve that shows the Ricardo-Barro effect on the loanable funds market. Label it C₂. Draw a point at the new real interest rate and quantity of loanable funds. The Ricardo-Barro effect crowding out. Click the graph, choose a tool in the palette and follow the instructions to create your graph. 10 8- 6- 4- 2- Real interest rate (percent per year) SLF PDLF Loanable funds (trillions of 2009 dollars) >>> Draw only the objects specified in the question.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?