Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 21, Problem 4P
To determine
To explain:
The effect on loanable funds
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The European Union sold 225 billion euros of green bonds as part of its pandemic recovery fund. How would this bond's issuance affect
the equilibrium in the market for loanable funds?
list the factors that affect the demand side of the loanable funds market. which factors shift the curve?
How does an increase in government borrowing affect the equilibrium interest rate in the market for loanable funds?
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- The stock market during 1998 and the first half of 1999 showed substantial strength. If the strong returns are expected to continue, how would this affect the supply of loanable funds?arrow_forwardWhat must have happened in the loanable funds market to produce the 2020 level of interest rates what caused this change?arrow_forwardThink about factors that may shift the demand for loanable funds. Sort the following scenarios into one of three possibilities: (i) Demand increases, (ii) Demand decreases, or (iii) Demand does not change. Items (5 items) (Drag and drop into the appropriate area below) Expected returns from capital investment increase Categories Government borrowing falls. Demand increases Drag and drop here Interest rates rise. Firms become more optimistic about the future. Demand decreases Drag and drop here Household incomes rise. No change in demand Drag and drop herearrow_forward
- Which factor brings the supply and demand of loanable funds into balance? net capital outflows the real interest rate the futures market for commodities collective bargaining domestic investmentarrow_forwardWhat factors make up the total demand for loanable funds? The total supply of loanable funds. Please list and define each of these demand and supply factors in the Loanable Funds Theory of Interest.arrow_forwardChanges 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 expectations effect describes a change in the interest rate due to a change in the price level. True O False The following graph shows the supply and demand curves in the market for loanable funds. Consider an increase in the price level. INTEREST RATE Adjust the following graph to show the effect of this increase in the price level. SLF QUANTITY OF LOANABLE FUNDS DLF SLF (?arrow_forward
- What happens to the market for loanable funds when interest rates increase? Planned investments increase. Planned investments is not effected There is a decrease in demand for loanable funds. There is a decrease in quantity demanded for loanable funds.arrow_forwardIf signs of an economic slowdown abroad and domestically do materialize, what would be your corporate saving strategies that you would implement?arrow_forwardProvide two examples of changes in the market for loanable funds that can result in a change in the level of interest rates. Explain how and why the interest rate changes based on the loanable fund theory.arrow_forward
- 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. NOTE: the first dropdown question options are (fall or rise), the seconds are (decrease or increase), the thirds are (fall or rise), the fourths are (fall or rise), the fifths are (deficit or surplus), the sixths are (decreases or increases), the sevenths are (fall or rise), and the last ones is (crowding out ot increasing)arrow_forwardWhat happen to the demand in market of loanable funds when NCO>0 and NCO<0?arrow_forwardFirst Call, Inc. is a smartphone company. First Call expects its profits to double next year. Explain how this increase in expected profit influence First Call's demand for loanable funds.arrow_forward
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