4.4 Explain and show graphically how an increase in expected profits from firm investment projects affects the equilibrium interest rate and the equilibrium quantity of loanable funds.

Q: Exercise 4 Consider the closed economy loanable funds model with : K = 100, L-100, F(K,L)= K®.5L05,…

A: Given ,  Government Expenditure = 40  Tax Revenue = 30  Budget Deficit /Surplus is referred as the…

Q: Suppose a closed economy has gross domestic product (GDP) of $10,000, Taxes of $3,000, Consumption…

A: National savings refer to the sum of private and public savings. When taxes exceed government…

Q: Consider an economy described by the following equations: Y = C + I + G Y = 5,000 G = 1,000 T =…

A: Given: Y = 5,000G = 1,000T = 1,000C = 250 + 0.75(Y −T )I = 1,000 − 50 r.

Q: factors that contribute to the successful investment

A: Investment means Balancing risks, between reward and opportunity cost - knowing the right balance…

Q: Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks.…

A: Investment is the source of demand for loanable funds. Saving is the source of supply of loanable…

Q: If the business community becomes more optimisticabout the profitability of capital, the…

A: Behavioral optimism refers to the positive attitude of gaining positive outcome from the investment…

Q: a. Suppose there are two types of investment in the economy: business fixed investment and…

A: The total amount of money that individuals and institutions in an economy have agreed to save and…

Q: Figure 21-2 Apal Interest FME 0 000 4₁ Loanable funds (billions of dollars per year) Refer to Figure…

A: The loanable funds concept is a theory of market interest rates in the field of economics. With this…

Q: 2. Demonstrate graphically and in words what the Loanable Funds Model would predict about the change…

A: In economics, the loanable fund's tenet is a hypothesis of the market financing cost. As indicated…

Q: Classify each of the given events according to the category that best describes how it affects the…

A: Increase the interest rate: An increase in the large investments: the new equilibrium point will be…

Q: (A) Suppose that in a closed economy GDP is equal to 15,000, taxes are equal to 2,000, Consumption…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: 5. A higher interest rate makes _____ more attractive. Therefore the quantity of loanable funds…

A: Since you asked multiple questions, we will solve the first question for you. If you want any…

Q: Q2.Using the Domestic Loanable funds market diagram, Explain what happens to Private savings,…

A: In the market of loanable funds, the price is considered to be the interest rate and the thing that…

Q: Suppose, the government of Australia incurs a budget deficit of $50 billion due to increased…

A: A budget deficit tends to occur when the expenses tend to exceed revenue and it indicates the…

Q: Recently, a legislator proposes to raise the expenditure on infrastructure. How would this affect…

A: Usually when government decides to increase its spending, it has a direct effect on the loanable…

Q: Consider the following policy scenarios and for each scenario diagrammatize and fully explain using…

A: Introduction: assuming there is a deficiency, the interest for loanable assets will increment on the…

Q: 120 100 80 60 40 20 45 20 40 60 80 100 120 Income (Billions) Refer to the above figure. If the…

A: The economies around the world tend to work upon the basis that each society has to face a scarcity…

Q: Draw the diagram for the loanable funds model. Suppose the tax laws are altered to provide more…

A: Loanable funds include all types of credits that are available in the market to firms and households…

Q: Recently, the economies of North Korea and Norway have begun to grow very rapidly. This increases…

A: The market equilibrium interest rate is decided by the supply of loanable fund and demand for…

Q: Suppose the government of Italy offered a tax credit for firms that help to restore and preserve…

A:

Q: Three students have each saved $1000. Each has an investment opportunity in which he or she can…

A: An investment project primarily consists of plans and actions that the investors carefully create…

Q: The table shows the demand for loanable funds schedule and the supply of loanable funds schedule…

A: In the loanable  fund market, real interest rate is determined by the intersction of quantity…

Q: Suppose there are two types of investment in the economy: business fixed investment and residential…

A: The total amount of money that individuals and institutions in an economy have agreed to save and…

Q: not understanding how to show this

A: The increase in the household savings rate means that consumers will be willing to consume less and…

Q: The next three questions involve the following situation. Consider a closed economy in which C =…

A: Given  C= $345 billion G= $350 billion Y=$1000 billion Tax T=$100 billion We have to find value of…

Q: Suppose real GDP is $5,136 billion, taxes collected by the government are $535 billion, government…

A: The savings refers to as the level of amount remaining after all the consumption expenditure…

Q: All other things equal, an increase in government borrowing will ________   a. shift the demand…

A: Government borrowing is financed thorough loanable funds. Increase in government borrowing means…

Q: Explain the role of interest rates in allocating capital, modulating R&D spending, and helping…

A: An interest rate is the percentage of principal being charged by the lender for use of its money.…

Q: Classify each of the following based on the macroeconomic definitions of saving and investment.…

A: Answer: Introduction: Saving: it refers to the extra income left after consumption. A person can…

Q: Select the true statement or statements regarding the loanable funds market. a.The purchase of…

A: Loanable funds market can be defined as the market where supply and demand of loanable funds takes…

Q: 1. Suppose GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5 trillion, and public…

A: We are going to find the National savings, investment and consumption expenditure using economic…

Q: Draw the graph of the effect on the equilibrium in the loanable funds market when corporate taxes…

A: As a source of revenue, corporate taxes are collected by the government. Taxes after costs have been…

Q: Suppose government provides tax rebate to small business on their business-related expenditure.…

A: There would be tax rebate for businesses.That would decrease the price of products and hence savings…

Q: The following graph shows the market for loanable funds in a closed economy. The upward-sloping…

A: Demand for loanable funds is negatively related to interest rates. It means an increase in interest…

Q: The demand for loanable funds comes from investment and the supply of loanable funds comes from…

A: The loanable funds market would result in the equilibrium between the demand and supply for funds.…

Q: The government of an economy has increased its spending and its taxes by the same amount. i) What…

A: a) The two levers available to the government for determining fiscal policy are spending and taxes.…

Q: Suppose the long-term real interest falls. In the (private sector) loanable funds market. the result…

A: Loanable funds market can be explained as the market which explains about the borrowings, where…