Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 21, Problem 5P
To determine
To explain:
The effect on loanable funds supply curve if current disposable income increases and new technologies decrease.
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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?
What 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.
How does an increase in government borrowing affect the equilibrium interest rate in the market for loanable funds?
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- Using the loanable funds theory, illustrate the effect of the following on the level of interest rates.A. An increase in expected future income. B. An increase in income levels which would result in an increase in the level of savings.arrow_forwardThe 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_forwardDistinguish between saving and investment.arrow_forward
- Provide 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_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_forwardThe 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_forward
- Along with the onset of the pandemic, capital inflows to Monotreme declined. Analyze the impact of this using the loanable funds market model. Would this impact supply of funds or demand for funds curve? How would the equilibrium values of real interest rate and quantity of loans change in response?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_forwardGive at least three examples of how savings can be channeled into productive investment. Why is investment so important for an economy? What do you sacrifice when you save today?arrow_forward
- Classify each of the given events according to the category that best describes how it affects the equilibrium interest rate in the market for loanable funds. Look at images for word bankarrow_forwardWhat must have happened in the loanable funds market to produce the 2020 level of interest rates what caused this change?arrow_forwardThe supply and demand curves for loanable funds are affected by different factors. Classify each event according to which curve shifts, if any, and the direction of the shift. an increase in tax breaks a decrease in the productivity of capital an increase in the real interest rate an increase in investor confidence an increase in life expectancy a decrease in the government budget surplus increase in the demand for loanable funds increase in the demand for loanable funds neither curve shifts increase in the demand for loanable funds increase in the supply of loanable funds increase in the demand for loanable funds Answer Bank increase in the supply of loanable funds increase in the demand for loanable funds decrease in the supply of loanable funds decrease in the demand for loanable funds neither curve shiftsarrow_forward
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