Suppose government budget requires the government to sell $30 billion bonds to the public. A. Use supply-demand diagram to analyze the impact on interest rate and investment. Explain the effect in words. B. Answer (a) assuming that the supply of loanable funds in perfectly inelastic

Suppose government budget requires the government to sell $30 billion bonds to the public. A. Use supply-demand diagram to analyze the impact on interest rate and investment. Explain the effect in words. B. Answer (a) assuming that the supply of loanable funds in perfectly inelastic

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 9P

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Graph Interest Rate Figure 2 Saving Incentives Increase the Supply of Loanable Funds A change in the tax laws to encourage Americans to save more would shift the supply of loanable funds to the right from S₁ to S₂. As a result, the equilibrium interest rate would fall, and the lower interest rate would stimulate investment. Here the equilibrium interest rate falls from 5 percent to 4 percent, and the equilibrium quantity of loanable funds saved and invested rises from $1,200 billion to $1, 600 billion. 5% 4% 2.... which reduces the equilibrium interest rate... See graph built step by step 0 $1,200 Supply, S₁ $1,600 3.... and raises the equilibrium quantity of loanable funds. 5₂ 1. Tax incentives for saving increase the supply of loanable funds... Demand Build graph yourself Loanable Funds (in billions of dollars)
If the interest rates increase this will _____ the quantity of loanable funds demanded, and if the interest rates decrease this will______it. Select one: a. increase; reduce b. increase; increase c. reduce; increase Od. reduce; reduce
4.4 how am i supposed to show this, are there going to be two lines crossing over eachother?
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!
Which of the following reasons could cause the demand curve for loanable funds to shift to the right from DLF to D¹LF in the figure? Wage $11 8 X 3400 2700 D 4500 Quantity of labor The economy is expected to boom, thereby increasing investment returns. O Larger investment projects with potentially higher returns get funded. Falling interest rates make it less expensive for firms to borrow. Rising interest rates make it more attractive for savers to save.
Chairman Latrobe, the Supreme Leader of Rolling Rock decided to increase the personal tax rate to fund the defense force. 8) How may this affect the loanable funds market? Explain by describing the change in the demand for, or the supply of, loanable funds. 9) Because of the change decreed by President Thug and your answer to question 8, what is likely to happen to the interest rate and the quantity of funds in the loanable funds market? 10) How will each of these Rolling Rockers feel about President Thug’s decision? (A) Investor Confidence (B) The President of Rolling Rock National Bank
#18. What would happen in the market for loanable funds if the government were to increase the tax on interest income? a The supply of loanable funds would shift right. b The demand for loanable funds would shift right. c The supply of loanable funds would shift left. d The demand for loanable funds would shift left.
In the loanable funds market, if firms become more optimistic about future profitability, then the a demand for loanable funds will increase, interest rates will increase, and private sector investment spending will increase. b demand for loanable funds will decrease, interest rates will decrease, and the equilibrium quantity of borrowing will decrease. c supply of loanable funds will increase, interest rates will decrease, and the equilibrium quantity of borrowing will increase. d supply of loanable funds will increase, interest rates will increase, and private sector investment spending will increase.
Recently, the economies of North Korea and Norway have begun to grow very rapidly. This increases their citizens’ income and wealth as well. In turn, these citizens increase their savings not only in their country, but also in the United States. In this case, which of the following statements is correct? A. The supply of loanable funds decreases as savings increase. B. The supply of loanable funds increases as savings increase. C. The demand of loanable funds decreases as savings increase. D. Both supply and demand of loanable funds increase as savings increase.
Recently, the economies of North Korea and Norway have begun to grow very rapidly. This increases their citizens’ income and wealth as well. In turn, these citizens increase their savings not only in their country, but also in the United States. In this case, which of the following statements is correct? A. The supply of loanable funds decreases as savings increase. B. The supply of loanable funds increases as savings increase. C. The demand of loanable funds decreases as savings increase. D. Both supply and demand of loanable funds increase as savings increase. Clear my choice
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