Suppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between differen real interest rates and this economy's levels of national saving, domestic investment, and net capital outflow. Assume that the economy is current operating under a balanced government budget. Real Interest Rate (Percent) 7 6 4425 3 National Saving (Billions of dollars) 45 40 35 30 25 20 Domestic Investment (Billions of dollars) 20 30 Market for Loanable Funds 40 50 60 70 Net Capital Outflow (Billions of dollars) -15 -10 -5 0 5 10 Given the information in the table above, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. (?)

Suppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between differen real interest rates and this economy's levels of national saving, domestic investment, and net capital outflow. Assume that the economy is current operating under a balanced government budget. Real Interest Rate (Percent) 7 6 4425 3 National Saving (Billions of dollars) 45 40 35 30 25 20 Domestic Investment (Billions of dollars) 20 30 Market for Loanable Funds 40 50 60 70 Net Capital Outflow (Billions of dollars) -15 -10 -5 0 5 10 Given the information in the table above, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. (?)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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?
7- We have the following data from the loanable funds market for Berberistan. Answer the following questions. Real interest rate Loanable funds Loanable funds supplied (trillions of dollars) demanded (percent per year) 3 10 4 4 5 8. 6. 6. 7 7 7 8 9. 9 4 10 a) What is the equilibrium real interest rate, total private saving and investment? (suppose that the government budget is balanced.) b) What will be the equilibrium real interest rate if the government's budget becomes a deficit of $2 trillion? What will be the private investment at the new equilibrium? Define "crowding-out" and tell if there is crowding-out in this case.
1. Consumption = 13,309 Exports = 2,316 Government purchases = 3,331 Saving = 6,607 Government budget deficit = 4,000 Imports = 2.883 %3D a. What is gross domestic product? GDP = b. What is investment? c. What is disposable income? Yd =. d. What is the level of government transfers minus taxes?
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.
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Suppose the GDP of a country with a closed economy is $22 trillion, (net) taxes are $4.2 trillion, public saving is $0.8 trillion, and private saving is $1.3 trillion. What are the values of consumption, investment, national saving, and government spending? 1b Is the government of this country running a budget surplus or a deficit?
4. An economy has government purchases of 1000. Desired national saving and desired investment are given by gd=200+5000r+0.10Y-0.20G jd=1000-4000r When the full-employment level of output equals 5000, calculate the real interest rate that clears the goods market.
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44. An increase in the general price level in the economy a) Will increase the purchasing power of consumers' wealth and decrease consumption spending. b) Will increase demand for, and decrease supply of loanable funds, causing the interest rate to increase which in turn will cause investment spending to fall. c) Makes domestic goods more expensive than foreign goods than before which will tend to decrease exports and increase imports, thus lowering net exports. d) All the above e) Only (b) and (c) are true
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] In the loanable funds market model, assuming everything else is constant, which curve (supply of funds or demand for funds) is affected if there is an increase in national saving? How will equilibrium real interest rate and equilibrium quantity of loans change?