Which of the following might produce a new equilibrium interest rate of 2% and a new equilibrium quantity of loanable funds of $5 trillion? OA. Firms become pessimistic about the future and, as a result, they cut back on their plans to buy new equipment and build new factories. B. Congress decreases the tax rate on interest income. C. Capital inflows from foreign citizens are declining. D. The U.S. government offers a tax credit for firms that built new factories in the U.S.

Which of the following might produce a new equilibrium interest rate of 2% and a new equilibrium quantity of loanable funds of $5 trillion? OA. Firms become pessimistic about the future and, as a result, they cut back on their plans to buy new equipment and build new factories. B. Congress decreases the tax rate on interest income. C. Capital inflows from foreign citizens are declining. D. The U.S. government offers a tax credit for firms that built new factories in the U.S.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 6P

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QUESTION 7 Use the following diagram to answer this question The accompanying graph shows the market for loanable funds in equilibrium. Interest rate (%) 12 10 8 6 4 2 0 S E X 2 D 3 4 6 5 Quantity of loanable funds (trillions of dollars) Which of the following might produce a new equilibrium interest rate of 2% and a new equilibrium quantity of loanable funds of $1 trillion? OA. Consumers have increased consumption as a fraction of disposable income. OB. Businesses have become more pessimistic about the future and, as result; they plan to cut back on their spending. OC. The federal government has a budget surplus rather than a budget deficit. OD. The federal government has a budget deficit rather than a budget surplus. uhmit. Click Save All Answers to save all answers.
The Atlantic Investment Tax Credit is a 10% tax credit available to businesses that make specific investments in the Atlantic region and the Gaspe Peninsula. The graph shows the market for loanable funds. Show the impact of this tax credit by moving the proper curve appropriately in the graph. The new equilibrium interest rate is The quantity of loanable funds is $ ક billion Which statement accurately describes the impact of the Atlantic Investment Tax Credit? Interest rate (%) 10 9 8 7 6 5 st 3 2 1 0 0 5 10 15 20 25 30 35 Quantity of loanable funds (in billions) 40 Supply Demand 45 50
This figure shows the loanable funds market for a closed economy. INTEREST RATE (Percent) 09 2 E с 50 100 150 LOANABLE FUNDS (Dollars) D₂ o Refer to Figure 26-4. Starting at point A, the enactment of an investment tax credit would likely cause the quantity of loanable funds traded to increase to $150 and the interest rate to rise to 6% (point C). decrease to $50 and the interest rate to fall to 2% (point B). decrease to $50 and the interest rate to rise to 6% (point E). increase to $150 and the interest rate to fall to 2% (point D).
1 a. Suppose there are two types of investment in the economy: business fixed investment and residential investment. Suppose that loanable fund market is in equilibrium and the government grants an investment tax credit only for business investment. How does this policy affect the supply and demand for loanable funds, the equilibrium interest rate and equilibrium quantity of loanable funds? Use graph to explain your answe
U3e the tollowing graph to show the effects on the Market for Loanable Funds of businesses discovering they have more than enough capital to meet the demand for their goods: Instructions: Drag the demand curve to illustrate the appropriate change in demand. Market for Loanable Funds Interest Rate 100 Supply (Savings) 90 80 70 60 50 Demand (Investment) 40 30 20 10 10 20 30 40 50 60 70 80 90 100 Dollar volume of Savings, Investment
K Consider the graph to answer the following questions: a. The shift from S, to S₂ represents in the supply of loanable funds. b. With the shift in supply, the equilibrium quantity of loanable funds c. With the change in the equilibrium quantity of loanable funds, the quantity of saving and the quantity of investment ▼ A CI Real Interest Rate Market for Loanable Funds L₂ L1 Loanable Funds ($ per year) S₁ Q
Real interest rate (percent per year) 10 8 6 4 2 0 1 SLF DLF 2 5 6 Loanable funds (trillions of 2009 dollars) 4) Using the figure above, show the effect on the real interest rate and the quantity of loanable funds of an increase in expected profit.
↑ 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 graph
Interest 6% lonable fund is 4trillion. Suppose there was a change in the tax laws to encourage savers to save more and as a result, assume the equilibrium interest rate falls by 2 % point. By how much the equilibrium loanable funds saved and invested would rise or fall?
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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…
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