Chapter 10, Problem 17P

To determine

Concept Introduction:

Investment Spending: All those spending’s which are done on physical capital which means that only expenses that increases an economy’s level of physical capital is known as investment spending.

Private Saving: It is the saving made by people for the time of emergency or the bad financial conditions.

Budget Balance: The budget is considered to be balanced when revenue collected from tax and expenditures made by the government are equal. When it is a deficit it is represented by a negative value, when it is a surplus it is represented by a positive value and in case of a balanced budget it is zero.

Loanable Funds Market: It is an imaginary market which illustrates the market result of the demand for funds which are generated by borrowers and the supply of funds which are provided by the lenders.

Demand for Loanable Funds: It is represented by a downward sloping curve which shows that as the interest rate increases, the demand for loanable funds decreases and vice versa.

Supply for Loanable Fund: It is represented by the curve that slopes upwards which means that as the interest rate increases, the supply of loanable fund also increases and vice versa.