(true/false and explanation) When nominal interest rates are zero, the central bank can still lower them by printing money and purchasing bonds from banks. This increases the supply of loanable funds and stimulates lending.
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(true/false and explanation)
When nominal interest rates are zero, the central bank can still lower them by printing money and purchasing bonds from banks. This increases the supply of loanable funds and stimulates lending.
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- 20 - As a result of rising interest rates ........A) The purchasing power decreases.B) Unemployment will decrease.C) Production increases.D) the government's income will increase.E) Investments increase.N6 Assume the US market for loanable funds is in equilibrium. Describe how an increase in the federal budget deficit will, all else equal, affect (A) the equilibrium real interest rate, (B) the equilibrium quantity of loans exchanged, and (C) the level of private investment spending.Suppose government moves to increase its budget deficit by $30million. With aid of the market for loanable funds diagram, illustrate the impact of this government spending. From the diagram in the above carefully explain what happens to : Rate of Interest Private spending National savings
- Suppose government moves to increase its budget deficit by $30 million. With the aid of the market for loanable funds diagram, illustrate the impact of this government spending. From the diagram drawn carefully explain what happens to: rate of interest private spending . national savingsNo1 ) Rob works as a loan officer for a major U.S. commercial bank, specializing in international loans. When considering loans to governments and businesses in other nations, Rob Multiple Choice must be aware of federal limits on the total amount of U.S. funds his bank can lend to foreign borrowers. can only make loans if his bank has funds in excess of those sought by American firms. is likely to approve loans to foreign borrowers if the return is high enough to justify the risk. must increase the dollar volume of loans they make to customers. must pay more to borrow from the Fed. have fewer funds available for lending. will find their balance sheets temporarily out of balance. must be careful to get approval from the International Monetary Fund. No. 2) When the Fed increases the reserve requirement, banks Multiple Choice must increase the dollar volume of loans they make to customers. must pay more to borrow from the Fed.…Question 2 (a) Michael is an Internet service provider. On December 31, 2009, he bought an existing business with servers and a building worth $400,000. During his first year of operation, his business grew and he bought new servers for $500,000. The market value of some of his older servers fell by $100,000. What was Michael’s: (i) gross investment during 2010 (ii) depreciation during 2010 (iii) net investment during 2010 (iv) capital at the end of 2010
- Suppose government moves to increase its budget deficit by $30 million. With the aid of the market for loanable funds diagram, illustrate the impact of this government spending.Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. Now suppose there is an increase in the tax rate on interest income, from 20% to 25%. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of interest income from saving causes the equilibrium interest rate in the market for loanable funds to Fall/Rise and the level of investment spending to decrease/Increase Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the 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 to Fall/Rise and the level of investment to Fall/Rise . Scenario 3: Initially, the government's budget is…During a year of operation, a firm collects $450,000 in revenue and spends $100,000 on labor expense, raw materials, rent and utilities. The firm’s owner has provided $750,000 of her own money instead of investing the money and earning a 10 percent annual rate of return. Question: Higher personal taxes in the U.S. will affect personal disposable income which in turn will affect the domestic demand for goods and services. Costs of production and inputs however continue declining. What do you expect the U.S. output and prices in the near future. Assume we are moving from the old equilibrium to a new equilibrium. Please state clearly your assumptions and include a graph to support your answer.
- 35) When a country has public-sector net borrowing, it means that A) the government has accumulated debt over a number of years. B) the total expenditure of central government, local government and public corporations exceeds the tax revenues and sales revenues collected by those bodies. C) central government's spending exceeds its tax receipts. D) nationalised industries are being subsidised.5. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) Scenario 1: Individual Retirement Accounts (IRAs) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Now suppose there is a decrease in the maximum contribution, from $5,000 to $3,000 per year. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of interest income from saving causes the equilibrium interest rate in the market for loanable funds to ______ (fall/ rise) and the level of investment spending to _____…True or false, with explanation Suppose the bank deposit has 30% annual interest rate. It implies that the purchasing power of depositors increases by 30% after one year.