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

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

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 9P

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(A) Suppose that in a closed economy GDP is equal to 15,000, taxes are equal to 2,000, Consumption equals 9,000, and government expenditures equal 4,000. What are private saving and public saving? a. 4000 and –2000 b. 4000 and 2000 c. 2000 and –2000 d. 2000 and 3000 (B) A lower interest rate induces people to a. save less, so the demand for loanable funds slopes upward. b. save less, so the demand for loanable funds slopes downward. c. invest more, so the demand for loanable funds slopes upward. d. invest more, so the demand for loanable funds slopes downward. (C) Alex puts $300 into an account when the interest rate is 5 percent. Later he checks his balance and finds he has about $330,75. How long did Alex wait to check his balance? a. 2 b. 2.5 c. 3 d. 4.5
Suppose 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.
Construct the market for loanable funds and use it to illustrate and explain each of the following:a) How an increase in the government budget deficit will affect equilibrium interest rate and investment spending of firms, other factors constantb) How an increase in household savings as they become more financial literate will affect equilibrium interest rate and investment spending of firms, other factors constantc) How an increase in business confidence will affect equilibrium interest rate and investment spending of firms, other factors constant.
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).
Suppose the economy is closed and consumption of $10,000, taxes are $2000 and government purchases are $3,000 and national saving is $1,500. (Given GDP=$14500, Public saving= -$1000, Private saving=$2500, Investment=$1500). So In the era of covid-19 pandemic, the producers were pessimistic about the returns of capital and reduced their investments. Use a well-labelled diagram of loanable funds market to illustrate and explain the impacts on the equilibrium interest rate and quantity of loanable funds.
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 deficit
Use the analysis for the market for loanable funds diagrams to examine and explain both in words anddiagrammatically how the following government policy affect the economy’s saving and investment.Policy 1: Suppose the government passed a tax reform giving an investment tax credit to any firmbuilding a new factory or buying a new piece of equipment
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. [Kindly note: please show Diagram and give Detailed Explanation (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)