8-Describe how the following statements affect either the supply or the demand forloanable funds. For each statement below, do the following:Explain whether the event affects either the demand or the supply of loanable funds.Describe how the statement will affect the equilibrium interest rate and quantity ofloanable funds.Draw a graph to demonstrate each answer. Please remember to label each part of thegraph. Indicate the change in the interest rate and the quantity of loanable funds onyour graph. Analyze each event independently. (Hint: Review the slides andrecordings of Lecture 4 for similar graphical analysis).Statements:a) "The national-level saving rate is important from a macroeconomic perspective, inthe sense that higher savings tend to strengthen the economy over the long run."b) “Slow-trend growth is reducing the opportunities for profitable long-terminvestments. The recent downturn in business investment was less of a cyclical blipthan a sign of things to come."c) "Government increased its expenditure on national defense which is expected toincrease budget deficit."

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"The national-level saving rate is important from a macroeconomic perspective, in he sense that higher savings tend to strengthen the economy over the long run."

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

8-
Describe how the following statements affect either the supply or the demand for
loanable funds. For each statement below, do the following:
Explain whether the event affects either the demand or the supply of loanable funds.
Describe how the statement will affect the equilibrium interest rate and quantity of
loanable funds.
Draw a graph to demonstrate each answer. Please remember to label each part of the
graph. Indicate the change in the interest rate and the quantity of loanable funds on
your graph. Analyze each event independently. (Hint: Review the slides and
recordings of Lecture 4 for similar graphical analysis).
Statements:
a) "The national-level saving rate is important from a macroeconomic perspective, in
the sense that higher savings tend to strengthen the economy over the long run."
b) “Slow-trend growth is reducing the opportunities for profitable long-term
investments. The recent downturn in business investment was less of a cyclical blip
than a sign of things to come."
c) "Government increased its expenditure on national defense which is expected to
increase budget deficit."

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