Scenario 1: The economy enters a recession driving down the demand for homes nationwide. 1. What is the expected impact on the demand for loanable It will decrease. 2. What effect will this change have on the interest rate? It will decrease because when the demand decreases the interest rate will also decrease. 3. How will this change the behavior of consumers?
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- Consider the supply and the demand in the market for loanable fund. If Mari purchased construction company’s stocks, to which is it added: Supply or Demand? If Mari borrowed to build her new house, which is it added to: Supply or Demand? Stock: House:Lista the factors that affect the supply side of the loanable funds market. which factors shifts the curve?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.
- 3. In cases below, answer questions below. 3.a. People’s preference for saving increased (so people would save more.) Which curve (demand or supply) would shift to which direction (left or right)? How would investment change: Decrease or Increase? Curve: Direction: Change in investment: 3.b. Prospect for profit from investments increased. How would the equilibrium quantity of loanable fund change: Decrease or Increase? How would the equilibrium interest rate change: Decrease or Increase? How would the saving would change: Decrease or Increase? Quantity: Interest rate: Change in savingIf and when the demand of loanable funds shifts to the left: Group of answer choices 1. This is good news for people who rely on the interest earnings from their savings but bad news for people who have outstanding home loans. 2. This is bad news for people who rely on the interest earnings from their savings but good news for people who have outstanding home loans. 3. This is good news both for people who rely on the interest earnings from their savings as well as those who have outstanding home loans. 4. This is bad news both for people who rely on the interest earnings from their savings as well as those who have outstanding home loans.Suppose the government of Australia incurs a budget deficit of $50 billion due to increased government spending in 2020 as result of Covid 19. Because of this, the government borrowing in 2021 increases by the same amount. a. Show this development using a graph representing the market for loanable funds for Australia. Explain in writing and using a graph the effect of this on interest rates. b. Compare the size of equilibrium changes in 1) investment, 2) public saving, 3) private saving and 4) national saving (public saving + private saving) with $50 billion increase in borrowing. Compare the changes (increase/decrease) in these variables indicating same, less or more than the $50 billion. c. Will the equilibrium quantity of national savings change by more or less than the initial change in public saving? Explain your answer (in 50 words…
- 1. In the model of the market for loanable funds, which of the following best describes why the supply curve is upward sloping? a The higher the interest rate, the more likely households are to spend b The higher the interest rate, the less likely firms are invest c The higher the interest rate, the more likely households are to borrow d The higher the interest rate, the more likely households are to save1. Assume a pandemic hits a nation hard. As a result, firms are less confident about the economy. The most likely result would be a. a higher demand for loanable funds. b. a higher supply of loanable funds. c. an increase in equilibrium interest rates. d. a lower demand for loanable funds. e. higher productivity of capital.use the analysis for the market of loanble funds to illustrate and explain how the following government policy affect the economy's savings and investment. Policy 1: Suppose the government changes its tax code allowing individuals to reduce their taxable income if they save money in registered retirement savings plan. a. State and explain which loanable funds curve would this policy affect? b. What would be the impact on interest rates? Draw the loanable funds diagram to illustrate your answers for a to c.
- 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…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.1) Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if: a reduction in military spending moves the government’s budget from deficit into surplus. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.