Consider the loanable funds model we analyzed in class. If there is an expected increase in future government spending, according to the PIH, A. Current real interest rates should rise. B. Current real interest rates should fall. C. Current investment should rise. D. Current investment should remain unchanged. E. both B and C

Consider the loanable funds model we analyzed in class. If there is an expected increase in future government spending, according to the PIH, A. Current real interest rates should rise. B. Current real interest rates should fall. C. Current investment should rise. D. Current investment should remain unchanged. E. both B and C

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter5: National Income Accounting

Section: Chapter Questions

Problem 3E

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Expecting an improving economy will generally cause an increase in investment that shifts the _____ curve for loanable funds to the _____. a. supply; left b. supply; right c. demand; left d. demand; right
d. In order to finance the increase in government spending on national defense from part (b), the government borrows funds from the public. Using a correctly labeled graph of the loanable funds market, show the effect of the government’s borrowing on the real interest rate. e. Given the change in the real interest rate in part (d), what is the impact on each of the following? Investment Economic growth rate. Explain.
*Draw graph and will the interest rate be the same Canadian economy has struggled with Covid pandemic crisis. However, numerous economic forecasts that the economy will soon enter an expansion. What is the likely effect of the expansion on the expected profitability of new investment in plant and equipment? Using loanable funds model, illustrate (graph) and explain the effect of the forecast of an economic expansion, assuming that both borrowers and lenders believe the forecast is accurate. What happens to the equilibrium (real) interest rate and the quantity of loanable funds? What happens to the quantity of saving and investment?
Consider the following policy scenarios and for each scenario diagrammatize and fully explain using analysis for the market for loanable funds how the following government policies affect the economy’s saving and investment. (a) Scenario Policy 1: Suppose the government starts with a balanced budget and then, because of a tax cut or spending increase, starts running a budget deficit. (b) Scenario Policy 2: Suppose the government changes the tax code, allowing individuals to reduce their taxable income if they save money in registered retirement savings plans (RRSPs).
Draw the diagram for the loanable funds model. Suppose the tax laws are altered to providemore incentives for private saving (assume that total tax revenue T does not change). Whathappens to the interest rate and investment?
In 1981, many interest rates in the United States were 15%, but the inflation rate was 10%. In 2015, many interest rates were less than 1%, and the inflation rate was 2%. a. What were the real interest rates in 1981 and 2015? b. all else equal, how does the drop in interest rates between 1981 and 2015 affect the quantity of loanable funds supplied?
Draw a graph of the supply and demand of loanable funds. Then, show how the interest rate will be affected when the following scenarios occur: a. The government implements a program that reduces investment tax credits. b. The government budget deficit is reduced by 30%. (Hint: Does the government still need to borrow?) c. More foreigners are saving their money in U.S. banks.
Which of the following is not na factor that affects the level of interest rates? a. Government debt levels b. Political stability c. Inflation expectations d. Economic growth Please provide me the correct answer and don't reject this important question I need a help on this . Your help will be appreciated. ##############$$$$$$$$$$#$$$$
(B)(Solow) An economy in which no TFP growth occurs is at steady state. An earthquakeoccurs destroying a fraction of the capital stock. Miraculously, no one is hurt. For this scenario, whathappens to the economy in the periods after the earthquake? Explain what happens to the level ofGDP, the level of the capital stock, and the growth rates of these variables in this example.
In 1981, many interest rates in the United States were 15%, but the inflation rate was 10%. In 2015, many interest rates were less than 1%, and the inflation rate was 2%. a. What were the real interest rates in 1981 and 2015? b. all else equal, how does the drop in interest rates between 1981 and 2015 affect the quantity of loanable funds supplied? Question 2. Recently, the economies of China and India have begun to grow very rapidly. This increases their citizens’ income and wealth. In turn, these citizens increase their savings in their country and also in the United States. a. When foreign savings enter the U.s. loanable funds market, which curve is affected—supply or demand? How is this curve affected? b. How would you graph the U.s. loanable funds market both before and after the increase in foreign savings? c. How does the change in foreign savings affect both investment and future output in the United states? Question 3. Bond A pays Rs. 80,000 in 20…
in a loanable funds model the economy is at its longrun equilibrium and suddenly there is a rise in real GDP. a. supply of loanable funds - shift left, shifts right, no shift b. real interest rate- increase, no change, decrease c. public saving- no change, increaes, increase d. investment- decrease, increase, no change
Using the market for loanable fund diagram, show graphically how it affects interest rate and investment in each of the following cases. a) G > T. b) A book titled ‘Live for Tomorrow’ convinces people to spend less. c) Tax on interest income rises. please answer step by step.Answer must be correct.Show all calculation. please Don,t copy from anywhere.