Institutions that help to channel funds from savers to borrowers are known as a) corporations. b) Treasury firms. c) financial intermediaries. d) primary markets. e) secondary markets.
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- Read the following premise carefully and answer the questions specifically and in detail: "Financial institutions such as banks, mortgage companies and finance companies serve as intermediaries between those who have a surplus versus those who have a deficit creating a capital injection market." Using the concepts of real interest rate and expected rate of return, he contrasts the relationship between savings and capital investment. Using the macroeconomic theory presented in the module content, he explains the relationship of the financial market with the economic growth of a country. Explain the dynamics that are expected to occur between different development policies in the injection of capital as instruments to promote growth, sustainability and economic stability of a country.The economy of Dream Island, which is isolated from the rest of the world, has the supply of loanable funds schedule and the demand for loanable funds schedule shown in the table below. As it happens, all of the supplies of loanable funds are from households' savings and the entre demand for loanable funds is from firms' investment demand. Real interest rate (percent per year) Supply of loanable funds (2005 dollars) Demand for loanable funds (2005 dollars) 5 2,000 5,000 7 3,000 4,000 9 4,000 3,000 11 5,000 2,000 a) Draw the demand and supply curves.1) 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 as a result?
- For each of the following pairs, which bond wouldyou expect to pay a higher interest rate? Explain.a. a bond of the U.S. government or a bond of anEastern European governmentb. a bond that repays the principal in year 2020 or abond that repays the principal in year 2040c. a bond from Coca-Cola or a bond from a softwarecompany you run in your garaged. a bond issued by the federal government or abond issued by New York StateOne of the biggest problems for any economy is to figure out how to get or transfer money from people or firms who want to save (savers) to people or firms who want to borrow (investors). Explain how financial markets can help to solve this problem efficiently. Discuss how financial markets function and which tools they can offer to solve this problem. Discuss how financial systems are of crucial significance to adequate capital formation, which is indispensable to a speedy economic growth and development.Please explain in three well-structured paragraphs the impact of a change in the savings rate on the output.
- 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?Suppose that Intel is considering building a new chip-making factory a. Assuming that Intel needs to borrow money in the bond market, why would an increase in interest rates affect Intel’s decision about whether to build the factory? b. If Intel has enough of its own funds to finance the new factory without borrowing, would an increase in interest rates still affect Intel’s decision about whether to build the factory? Explain!Let's say that due to political turmoil in the US and abroad, people all over the world start to lose confidence in American securities. Both Americans and foreigners prefer to do their financial investment elsewhere. As a result, we'd expect the supply of loanable funds to shift to the right and the real interest rate to fall the supply of loanable funds to shift to the left and the real interest rate to rise the supply of bonds to shift to the right and the real interest rate to fall the supply of bonds to shift to the left and the real interest rate to rise
- Suppose that the demand for laonable funds for car in the Milwaukee area is $11million per month at an interest rate of 10 percent per year, $12million at an interest rate of 9 percent per year, $13million at an interest rate of 8 percent per year and so on. a. If the supply of loanable funds is fixed at $17million, what will be the equilibrium interest rate? b. If the government imposes a usury law and says that car loans cannot exceed 3 percent per year, how big will the monthly shortage (or excess demand) for car loans be? c. How big will the monthly shortage for car loans be if the usury limit is raised to 7 percent per year?Hide Assignment Information Instructions The table below is broken down by Month, Real Interest Rate (%), Loanable Funds (trillions of $), Exogenous Change, Equilibria (increases, decreases, or no change. Use the data table to determine the equilibrium real interest rate after certain factors change: Month Real Interest Rate (%) Loanable Funds (trillions of $) Exogenous Change Equilibria (increases, decreases, or no change) January 3% 3 no change no change April 3% 4 increased fund supply ? July 4% 2 decreased fund supply ? December 3% 3 increased fund demand ?Chairman Latrobe, the Supreme Leader of Rolling Rock decided to increase the personal tax rate to fund the defense force. 8) How may this affect the loanable funds market? Explain by describing the change in the demand for, or the supply of, loanable funds. 9) Because of the change decreed by President Thug and your answer to question 8, what is likely to happen to the interest rate and the quantity of funds in the loanable funds market? 10) How will each of these Rolling Rockers feel about President Thug’s decision? (A) Investor Confidence (B) The President of Rolling Rock National Bank