shift inwards AN shift outwards move-along upwards A rise in the interest rate would cause v move-along downwards n the Demand of Loanable Funds (Investment function).
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- Assume that the stock market experiences a massive rally, leading to a significant increase inhousehold wealth. Analyze the effects of this increase in household wealth:b. On national saving, investment, and the real interest rate (the goods market). Explain and showgraphicallyDrive the is curve mathematically anf graphically when investment function is more sensitive to rate of interestSuppose a handbill publisher can buy a new duplicating machine for $500 and the duplicator has a 1-year life. The machine is expected to contribute $550 to the year’s net revenue. What is the expected rate of return? If the real interest rate at which funds can be borrowed to purchase the machine is 8 percent, will the publisher choose to invest in the machine? Explain.
- A decline in the interest rate, other things constant, shifts the investment schedule downward. O True O FalseThe equilibrium interest rate:Select one:a. both has an inverse relationship with money supply and affects both the size of totaloutput and its compositionb. determines the composition of spending but not its total amount.c. affects both the size of total output and its composition.d. has an inverse relationship with money supply.e. falls when the demand for loanable funds increases.The above schedule indicates that if the real interest rate is 6 percent, then: Select one: a. $25 billion of investment will be undertaken. b. we cannot tell what volume of investment will be profitable. c. $40 billion of investment will be undertaken d. $30 billion will be both saved and invested.
- Scenario 1: Individual Retirement Accounts (IRAs) allow workers to shelter a portion of their income from taxation. Suppose the maximum annual contribution to accounts of this type is $6,000 per person. Now suppose there is an increase in the maximum contribution, from $6,000 to $9,000 per year. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds tofall and the level of investment spending toincrease . Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital within some relevant time period. Suppose the government implements a new investment tax credit. Shift the appropriate curve on the graph to reflect this change. The implementation of the new tax credit causes the interest rate tofall and the level of saving tofall . Scenario 3: Initially, the government's budget is balanced; then…Suppose that an economy's net investment flow is I(t) = 2t + 10t1/2.Letting K(0) is the initial investment, use the definite integralto find the level of capital: a.Next 5 yearsb. Initial investment, K(0) = 100The saving function is given as:- S = -25 +0.25Y Calculate the equilibrium level of income in the economy if it is given that the planned investment is $200 million.
- Consider following equations: Y=C + I +G Y=7,000 G=4000 T=2,000 C=150+0.75(Y-T) I=1,000-50r Now suppose the G rises BY 1,000. Compute private saving, public saving, and national saving. Calculate the new equilibrium interest rate.Suppose government budget requires the government to sell $30 billion bonds to the public. A. Use supply-demand diagram to analyze the impact on interest rate and investment. Explain the effect in words. B. Answer (a) assuming that the supply of loanable funds in perfectly inelastic.A consumer lives three periods, called the learning period, the working period, and the retirement period. Her income is 150 during the learning period, 1000 during the working period, and 400 during the retirement period. The consumer's initial assets are 100. The real interest rate is zero. The consumer desires perfectly smooth consumption over her lifetime. What are consumption and saving in each period, assuming no borrowing constraints (saving can be negative)? Give typing answer with explanation and conclusion
