ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
4th Edition
ISBN: 9781285423548
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 13, Problem 2.5PA
To determine
The reason why the demand slope of Loanable fund curve is downward to the right.
Concept Introduction:
In the market of loanable funds which is the market where individual wish to borrow fund or save in order to earn interest.
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Students have asked these similar questions
#17.In the market for loanable funds, the interaction of the demand for, and supply of, loanable funds determines the equilibrium level of
a
the inflation rate.
b
gross domestic product.
c
the real interest rate.
d
the nominal interest rate.
The government of Rwanda eliminates taxes interest income. What happens in their market for loanable funds?Question 29 options:There would be an increase in the amount of loanable funds borrowed.There would be a reduction in the amount of loanable funds borrowed.There would be no change in the amount of loanable funds borrowed.The change in loanable funds is uncertain.
4) a) the demand for credit or loanable funds describes how much money consumers and business in an economy wish to borrow. Illustrates the four demands for loanable funds.
Chapter 13 Solutions
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
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- 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 savingsarrow_forwardSuppose 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 savingsarrow_forward16- Which one of these will be deducted from gross output to determine the net output? a. Intermediate consumption b. Private income c. Factor income from abroad d. Total government spendingarrow_forward
- 1. Using the market for loanable fund diagram, show graphically and explain how the interest rate and investment are affected in each of the following cases. (Draw a separate diagram for each.)i. Tax on interest income decreases.ii. Government is running a budget surplus.iii. Investment tax credit falls.arrow_forwarda. 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 i. rate of interest ii. private spending iii. nationals savingsarrow_forward1 a. Suppose there are two types of investment in the economy: business fixed investment and residential investment. Suppose that loanable fund market is in equilibrium and the government grants an investment tax credit only for business investment. How does this policy affect the supply and demand for loanable funds, the equilibrium interest rate and equilibrium quantity of loanable funds? Use graph to explain your answearrow_forward
- 44. An increase in the general price level in the economy a) Will increase the purchasing power of consumers' wealth and decrease consumption spending. b) Will increase demand for, and decrease supply of loanable funds, causing the interest rate to increase which in turn will cause investment spending to fall. c) Makes domestic goods more expensive than foreign goods than before which will tend to decrease exports and increase imports, thus lowering net exports. d) All the above e) Only (b) and (c) are truearrow_forwardEconomy 1. Pamela worked as an auditor earning $60,000 per annum. She decided to open her own consultancy business. For her business, she rents an office where she pays $2,000 per annum. Further, her utility expenses are $300 per annum and she hired a part-time secretary to whom she pays $25,000 per annum. To start her business, she borrowed $40,000 from her savings, where she was earning an interest of $500 per annum. In her first year, her business earned a revenue of $300,000. Based on this information, calculate the following: a. Total implicit costs per annum b.Total explicit costs per annum c.Total accounting costs and accounting profit for that year d.Total economic costs and economic profit for that yeararrow_forwardItem14 ItemSkipped eBook Item 14 Harvey quit his job at State University, where he earned $58,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $8,000 a year. To start the business, he cashed in $60,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 15,000 units of software at $60 for each unit. Of the $60 per unit, $50 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The total revenues of Harvey's firm in the first year werearrow_forward
- 5. A higher interest rate makes _____ more attractive. Therefore the quantity of loanable funds supplied increases. 6. When tax code changes increase saving incentives, the interest rate will _____ and investment will _____.arrow_forward5. 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 _____…arrow_forward8 Spending by industry on investment not injected into circular flow of income Select one: a. False b. Truearrow_forward
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