PRIN.OF ECON.ACCESS CODE
PRIN.OF ECON.ACCESS CODE
2nd Edition
ISBN: 9780393691757
Author: Mateer
Publisher: NORTON
Question
Book Icon
Chapter 22, Problem 1QFR
To determine

To explain:

The significance of loanable funds market to basic GDP in macroeconomy.

Expert Solution & Answer
Check Mark

Explanation of Solution

In modern macroeconomy, loanable funds market is a big source of national GDP because here huge volume of transaction of funds takes place. The expenditure method of accounting national income is Y=C+I+G + (X-M) whereC is consumption spending,I is investment spending,G is government spending, andX- M is net imports.

Savings is residual part of income after consumption.Iis normally defined as buying of things which will be used to generate more products and services in the future. In terms of national accounting,stocks,bonds,mutual funds and other cash equivalents are not categorized as assets,but rather categorized as savings.Savings from this view facilitate the acquisition of capital that is included in investments. Savings is done from household sector.

In a closed economy where there is no export or activity to interfere with the level of domestic savings, individual savings generate the provision of loanable funds accessible for investment reasons on an aggregate basis.The quantity of saved money available in the economy is equal to the quantity of financing available for business activities.The greater the savings level,typically the reduced the comparative rate of interest,ceteris paribus.On a macroeconomic theory grounds,a greater savings rate encourages company activity by reducing the price of cash and increasing risk taking operations to promote the development or manufacturing of products and services.

In loanable funds market,the financial intermediaries can help to increase the incentive to save by creating economic products that give easy liquidation but provide a greater return than a savings account. In this way,financial intermediaries in loanable funds market are an important element for transforming savings into investment.Savings like mutualfunds, and insurance annuities, sold by financial intermediaries consists of stocks,and bonds which in turn pay for investment capital,which improves the productivity,effectiveness,and production of products and services in the macroeconomy.

Economics Concept Introduction

Loanable fund market:

Loanable fund market is the situation in which the needy or demander of funds and the supplier of funds meet and exchange the funds at a determined interest rate. It plays important role in finding basic GDP in macroeconomy.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Johnny brought $39.50 to the art supply store. He bought a brush, a sketchbook, and a paint set. The brush was  1 6  as much as the sketchbook, and the sketchbook cost  3 4  the cost of the paint set. Johnny had $2.00 left over after buying these items.
A young woman plans to retire early in 25 years. She believes she can save $10,000 each year starting now. If she plans to begin withdrawing money one year after she makes her last payment into the retirement account (i.e., in the 26th year), what uniform amount could she withdraw each year for 30 years, if the account earns an interest rate of 8% per year? a) Correctly plot the cash flow diagram with its respective vectors, arrowheads, units, and currency values. b) Correct mathematical approach and development, use of compound interest factors.c) Financial logic in the development of the exercise and application of the concept of time value of money. d) Final numerical answer and writing in prose with a minimum of 20 words and a maximum of 50 words of the obtained numerical interpretation.
A hospital charges $200 for a medical procedure, and 1,000 patients use the service. The hospital raises the price to $250, and the number of patients drops to 900. Calculate the price elasticity of demand (PED) and explain your answer. (show all working) Briefly explain how elasticity affects government health policies in the following cases: • Taxes on unhealthy products (cigarettes, alcohol, sugary drinks) • Subsidizing Preventive Care (e.g., vaccines, screenings) Drug Price Controls & Generic Substitutions Co-Payments & Insurance Design
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Macroeconomics
Economics
ISBN:9781337617390
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
MACROECONOMICS FOR TODAY
Economics
ISBN:9781337613057
Author:Tucker
Publisher:CENGAGE L
Text book image
Economics For Today
Economics
ISBN:9781337613040
Author:Tucker
Publisher:Cengage Learning
Text book image
Survey of Economics (MindTap Course List)
Economics
ISBN:9781305260948
Author:Irvin B. Tucker
Publisher:Cengage Learning
Text book image
Economics:
Economics
ISBN:9781285859460
Author:BOYES, William
Publisher:Cengage Learning