Consider a closed economy. Consider the effects of an increase of LFD in the loanable funds market. In terms of the absolute value, its SRGE effects on y* is its LRGE effects on y*. Here it = an increase of LFD in the loanable funds market. Hint: You need to read the lecture notes of 4.3 General Equilibrium Effects - Notes.pdf either larger than, or small than, or the same as O larger than smaller than the same as
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- Consider the following data (in billion $) for a country in a particular year: (assume this country has Zero Transfer Payment Personal consumption expenditure (C) 200 Exports (x) 10 Government Purchases of goods and services (G) 120 Imports (m) 15 Gross Domestic Product (Y) 1800 Taxes 20 d. What is the value of gross investment? e. What is the value of net export? f. Is the country lending to or borrowing from rest of the world? g. Dose the government has deficit, balance or surplus budget? h. What is the amount of investment financed by national saving? i. What is the amount of investment financed by borrowing from rest of the world? J. What is the meaning of transfer paymentSuppose Wonderland is a closed economy with a consumption function of C =500 + 0.6 x (Y-T).Recently, a legislator proposes to raise the expenditure on infrastructure.How would this affect national saving, real interest rate and investment inWonderland in the long run? Explain using the concept of loanable fund market.Question Need help calculating this one. Please show all work. Hints: Equilibrium Condition is S=I. If economy is open r=r*. Assume that in a small open economy where full employment always prevails, national saving is 300. a. If domestic investment is given by I = 400 – 20r, where r is the real interest rate in percent, what would the equilibrium interest rate be if the economy were closed? b. If the economy is open and the world interest rate is 10 percent, what will investment be? c. What will the current account surplus or deficit be? What will net capital outflow be? Assume that in a small open economy where full employment always prevails, national saving is 300. a. If domestic investment is given by I = 400 – 20r, where r is the real interest rate in percent, what would the equilibrium interest rate be if the economy were closed? b. If the economy is open and the world interest rate is 10 percent, what will…
- According to how we model the Loanable Funds market in Ch. 6 (considering household savings and taking (T – G) as government’s net ‘saving,’ which could be negative it there were a budget deficit), which of the following shifts the Supply of Loanable Funds curve to the left? (T = taxes; G = government spending.) Group of answer choices A) higher tax rates on business investment spending B) a change in tastes toward consuming less C) higher budget deficit D) change in tastes toward saving more E) lower budget deficitDear Sir/Madam while studying for my macroeconomics course, I came across this case study that I am struggling with right now. Thank you for your help. Assume the economy is open to capital inflows and outflows and therefore net capital inflow equals imports (IM) minus exports (X). Calculate each of the following. a) X = $125 million IM = $80 million Budget balance = - $200 million I = $350 million Calculate private savings. b) X = $85 million IM = $135 million Budget balance = $100 million Private savings = $250 million Calculate I. c) X = $60 million IM = $95 million Private savings = $325 million I = $300 million Calculate the budget balance. d) Private savings = $325 million I = $400 million Budget balance = $10 million Calculate IM – X.Draw the loanable funds market for 30-year fixed rate mortgages with the equilibrium rate at 5.13% and the equilibrium total amount of mortgages at $12.0 trillion. a> For the sake of simplicity, assume that mortgages are issued and financed through “banks” (I know some of you work in the mortgage, real estate, or finance industry and know the minute details of the mortgage market, but let’s just keep it simple). If people are willing to save more money in “banks,” how will this market be affected? (i.e., which curve(s) will shift, and in which direction?) b> What will happen to the equilibrium quantity of loans after the event in part a? What will happen to the equilibrium interest rate for 30-year fixed rate mortgages after the event in part a?
- Consider the following data (in billion $) for a country in a particular year: (assume this country has Zero Transfer Payment Personal consumption expenditure (C) 200 Exports (x) 10 Government Purchases of goods and services (G) 120 Imports (m) 15 Gross Domestic Product (Y) 1800 Taxes 20 g. Dose the government has deficit, balance or surplus budget? h. What is the amount of investment financed by national saving? i. What is the amount of investment financed by borrowing from rest of the world? J. What is the meaning of transfer paymentSuppose in a closed economy with positive national saving, consumption is 70% of GDP, taxes net of transfers are 30% of total consumption and investment, and government spending is less than investment. Which of the following statements is true? (a) Public saving is greater than private saving. (b) Private saving is 9% of GDP. (c) Public saving is less than 10% of GDP. (d) Investment is less than 10 Also give Why other False.Consider an decrease in (domestic) taxes (T). a. Consider the event in the long-run closed economy model. How will private and public savings be affected? Explain. Illustrate graphically using the domestic loanable funds market how such an event will affect the equilibrium domestic national savings, domestic investment spending and domestic real interest rate. Explain. b. Consider the same event, but now in the long-run small open economy model. (Assume the economy is originally running a trade surplus.) i. Illustrate graphically using the domestic loanable funds market how such event will affect the equilibrium domestic national savings, domestic investment spending, net capital outflow and domestic real interest rate. Explain how the differences in the results obtained here from the results obtained in (a) come about. ii. Consider again the same event in the long-run small open economy context. Illustrate graphically using the…
- Other things equal, an increase in the U.S. netcapital outflow _________ the demand for loanablefunds and _________ the supply of dollars in themarket for foreign currency exchange.a. increases; increasesb. increases; decreasesc. decreases; increasesd. decreases; decreasesAssume the United States economy is currently at equilibrium. Using a correctly labeled aggregate demand and supply graph, show: Full employment output (yf) Current price level (PL1) The Russians have been threatening us for months, and the President orders and expansion of our military so that we can be prepared for war. On your graph from question 1, show what will happen in the economy, labeling the new equilibrium as Q2, PL2. Using a correctly labeled graph of the loanable funds market, show how the President's decision will affect the economy. Explain what happens. Based on your graph from #3, explain what life will be like in the US for people and businesses wishing to take out loans. What is the term for this situation?] In the loanable funds market model, assuming everything else is constant, which curve (supply of funds or demand for funds) is affected if there is an increase in national saving? How will equilibrium real interest rate and equilibrium quantity of loans change?