The more elastic the supply of loanable funds, theThe more elastic the demand for loanable funds, theis the change in national saving as a result of the increase in government borrowing.This belief would cause people to saveThis wouldthe change in national saving as a result of the increase in government borrowing.Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future.today, which wouldprivate saving andthe effect of the reduction in public saving on the market for loanable funds.the supply of loanable funds. 7. Saving/Investment again---Suppose the government borrows $20 billion more next year than this year.The following graph shows the market for loanable funds before the additional borrowing for next year.Use the orange line (square point) to graph the new supply of loanable funds as a result of this government policy to borrow $20 billion more nextyear than this year.Interest Rate (Percent)10 Demand97X38boch21910010 20 3040 50 6070 80Loanable Funds (Billions of dollars)As a result of this policy, the equilibrium interest rateSupplyThe more elastic the supply of loanable funds, the90100New Supply?Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply.National saving decreases by more than $20 billion.Private saving decreases by less than $20 billion.Investment decreases by less than $20 billion.Public saving decreases by exactly $20 billion.is the change in national saving as a result of the increase in government borrowing.

Budget deficit refers to a situation where a government spends more money than it collects in…

uppose the government borrows $20 billion more next year than this year. The following graph shows the market for loanable funds before the additional borrowing for next year. Ise the orange line (square point) to graph the new supply of loanable funds as a result of this government policy to borrow $20 billion more next -ear than this year. Interest Rate (Percent) 10 9 8 X 0 10 20 30 40 50 60 70 80 90 Loanable Funds (Billions of dollars) 3 Demand 2 Supply As a result of this policy, the equilibrium interest rate 100 0- National saving decreases by more than $20 billion. Private saving decreases by less than $20 billion. New Supply Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply.

uppose the government borrows $20 billion more next year than this year. The following graph shows the market for loanable funds before the additional borrowing for next year. Ise the orange line (square point) to graph the new supply of loanable funds as a result of this government policy to borrow $20 billion more next -ear than this year. Interest Rate (Percent) 10 9 8 X 0 10 20 30 40 50 60 70 80 90 Loanable Funds (Billions of dollars) 3 Demand 2 Supply As a result of this policy, the equilibrium interest rate 100 0- National saving decreases by more than $20 billion. Private saving decreases by less than $20 billion. New Supply Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Answer the last question
2
The table shows the demand for loanable funds schedule and the supply of loanable funds schedule when the govemment budget is balanced. If the government budget deficit is $1.0 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving? Is there any crowding out in this situation? HEITI If the government budget deficit is $1.0 trillion, the real interest rate is percent a year If the government budget deficit is $1.0 trillion, the quantity of investment is $ trillion, and the quantity trillion. of private saving is $ S Is there any crowding out in this situation? OA. Yes. The deficit increases the real interest rate, which decreases investment. GELOO Real interest rate (percent per year) 4 677997 8 10 4 Loanable funds Loanable funds demanded supplied (trillions of 2012 dollars per year) 8.5 8.0 05 77761 7.5 7.0 6.5 05 6.0 5.5 5.5 6.0 6.5 7.0 7.5 8.0 8.5 6770 00
7. Problems and Applications Q8 Suppose the government borrows $20 billion more next year than this year. The following graph shows the market for loanable funds before the additional borrowing for next year. Use the orange line (square point) to graph the new supply of loanable funds as a result of this government policy to borrow $20 billion more next year than this year. Interest Rate (Percent) 10 9 8 7 6 01 3 2 1 0 0 Demand 10 20 30 40 50 60 70 Loanable Funds (Billions of dollars) 80 Supply 90 100 New Supply ?
4. The money supply, the loanable funds market, and interest rates Changes in the money supply affect the interest rate through changes in the supply of loans, Real GDP, the price level, and the expected inflation rate. True or False: The income effect describes a change in the interest rate due to a change in the Real GDP. True O False The following graph shows the supply and demand curves in the market for loanable funds. Consider an increase in the Real GDP. INTEREST RATE Adjust the following graph to show the effect of this increase in the Real GDP. QUANTITY OF LOANABLE FUNDS The liquidity effect The price-level effect SLE The income effect The expectations effect DLF ܘ ܘ Which of the following refer to changes that affect the demand for loanable funds but not the supply? Check all that apply. DLF SLF (?)
22
5. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) Customize and control Google Chrome Supply Demand Supply Demand LOANABLE FUNDS (Billions of dollars) Scenario 1: Individual Retirement Accounts (IRAS) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Now suppose there is an increase in the maximum contribution, from $5,000 to $8,000 per year. INTEREST RATE (Percent)
4
d H-50 Home BIU ab Insert Page Layout Online class3 (1).docx - Microsoft Word 10 abc X₂ x Aa A A Font References Mailings Review View CM 24 Paragraph Picture Tools Format AaBbCcDdi AaBbCc AaBbCc Emphasis Heading 1 Heading 2 Styles 10 CA A Change Editing Styles EXERCISES FOR CHAPTER 6 Exercise 6.1 Suppose that in an economy with no government the aggregate expenditure function is: AE = 50+0.75Y. (a) Draw a diagram showing the aggregate expenditure function, and indicate the level of planned expenditure when income is 150. (b) In this same diagram, show what would happen to aggregate expenditure if income increased to 200. (c) What are the levels of autonomous expenditure and induced expenditure at income levels of 150 and 200. (d) In this same diagram show what would happen if autonomous expenditure increased by 20. Exercise 6.2 Suppose the media predicts a deep and persistent economic recession. Households expect their future income and employment prospects to fall. They cut back on…
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?
Consider the following NIPA data for 1Q2021 (First Quarter 20210 $ billlion) Investment: Non Residential $2,948.3 Exports $2,305.3 PCE Goods $5,183.5 Investment: Residential $1,043.7 Government Expendiures Federal $1,557.0 PCE Services $9,857.7 Imports $3,152.3 Governemnt Expenditures : State and local Goernent Expenditures $2,395.9 Change in private inventories -$90.1 1. Write the formula for GDP Compute the following: 2. Personal Consumption Expenditures (PCE): 3. Gross Private Domestic Investment (GPDI) 4. Net Exports (NX) 5. Government Expenditures (GOV) 6. GDP
Consider the following NIPA data for 1Q2021 (First Quarter 20210 $ billlion) Investment: Non Residential $2,948.3 Exports $2,305.3 PCE Goods $5,183.5 Investment: Residential $1,043.7 Government Expendiures Federal $1,557.0 PCE Services $9,857.7 Imports $3,152.3 Governemnt Expenditures : State and local Goernent Expenditures $2,395.9 Change in private inventories -$90.1 2a. Compute the weights of each of PCE, GPDI, NX and GOV) in GDP 2b. Consider the following rates of change (%) for each of the above items. % change PCE 10.70% GPDI -5.00% NX -6.80% GOV 6.30%