There is recently an increase in private saving in Canada. Assume this occured by a drop in autonomous consumption. a. what happens to the supply of loanable funds? Shift right, shift left, no shift b. what happens to the demand for loanable funds? Shift right, shift left, no shift c. what happens to the real interest rate? up, down, stay the same

There is recently an increase in private saving in Canada. Assume this occured by a drop in autonomous consumption. a. what happens to the supply of loanable funds? Shift right, shift left, no shift b. what happens to the demand for loanable funds? Shift right, shift left, no shift c. what happens to the real interest rate? up, down, stay the same

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Savings,investment And The Financial System

Section: Chapter Questions

Problem 4CQQ

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What would happen in the market for loanable funds if the government were to increase the tax on interest income? A) Real interest rates would rise. B) Real interest rates would be unaffected C) Real interest rates would fall. D) The effect on the real interest rate is uncertain.
If a popular TV show on personal finance convincesAmericans to save more for retirement, the_________ curve for loanable funds would shift,driving the equilibrium interest rate _________.a. supply; upb. supply; downc. demand; upd. demand; down
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?
Complete the following statements. a. Dan saves a portion of his income in an interest-earning account. In the loanable funds market, Dan is b. John owns a pizzeria and needs to borrow money for a new oven. In the loanable funds market, John is c. Savers like Dan are likely to save more when the real interest rate . Therefore, the supply of loanable funds Look at images for word bank . d. Borrowers like John are likely to borrow more when the real interest rate . Therefore, the demand for loanable funds .
Show the effect on the real interest rate and equilibrium quantity of loanable funds of a decrease in the demand for loanable funds and a smaller decrease in the supply of loanable funds. Draw a demand for loanable funds curve. Label it DLF0. Draw a supply of loanable funds curve. Label it SLF0. Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF1. Draw a curve that shows a smaller decrease in the supply of loanable funds. Label it SLF1. Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2.
Why, other things remaining the same, does a rise in the real interest rate decrease the quantity of loanable funds demanded? The quantity of loanable funds demanded decreases because at a higher interest rate _______. A. fewer projects have an expected rate of profit below the real interest rate B. more projects have an expected rate of profit that exceeds the real interest rate C. banks want to lend more D. fewer projects have an expected rate of profit that exceeds the real interest rate
Using a correctly labeled loanable funds graph, show the effect of the contractionary fiscal policy decreasing government spending on real interest rates. Given the change in the real interest rate. What is the impact on each of the following? a. investment b. Economic growth rate. Explain. c. The international value of the dollar. Explain. Now assume instead that the government takes no policy action to fix the problem of the economy that is operating above full employment. In the long run, will the short-run aggregate supply increase, decrease, or remain unchanged? Explain.
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 loanable funds market to illustrate the effect of the following events on the equilibrium. Illustrate the effects on the interest rate and quantity of investment-savings a) The proportion of retired people in the population goes up. Think that usually retired people generally save less than working people at any interest rate. b) At any given interest rate, consumers decide to save more (assume the budget balance is zero). c) At any given interest rate, businesses become very optimistic about the future profitability of investment spending (assume the budget balance is zero).
Suppose the government borrows $20 million more next year than this year. What happens to investment? To private savings? To public savings? To national savings? How does the elasticity of the supply of loanable funds affect the size of these changes? How does the elasticity of the demand of loanable funds affect the size of these changes?
Due to recent pandemic in country A, the economic activity in this country has decreased substantially causing a significant reduction in government revenues. The country projects a budget deficit of 35 billion dollars next year. The government of Canada borrows $35 billion more next year than this year from the market for loanable funds. a) Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? Note: make sure you label your diagram properly. b) What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the $35 billions of extra government borrowing. Hints: explain with diagram and/or formula learned. c) How does the elasticity of supply of loanable funds affect the size of these changes? Hints: demonstrate with diagrams.
Most Australians are found to be frugal during the coronavirus pandemic and have started saving more. Explain how an increase in household saving affects the equilibrium interest rate and the equilibrium quantity of loanable funds.