Pearson eText Economics -- Instant Access (Pearson+)
13th Edition
ISBN: 9780136879459
Author: Michael Parkin
Publisher: PEARSON+
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Chapter 29.1, Problem 4RQ
To determine
Identify the impact of the fall in productivity in terms of the real business cycle (RBC) theory.
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In an unhindered free market, the supply and demand for loanable funds and, hence, the going rate of interest are driven by:
The amount of money printed by the U.S. Treasury
Time preferences of market participants
Animal spirits
The amount of deposits in the Federal Reserve
If the following policies were implemented, how would it affect the market for loanablefunds, interest rates, investment and economic growth. Explain by using diagrams.
a) A change in tax code that might increase private saving.
b) Increase in government spending and also budget deficits.
If there is a fall in the real interest rate, how does the quantity of loanable funds supplied change?
Chapter 29 Solutions
Pearson eText Economics -- Instant Access (Pearson+)
Ch. 29.1 - Prob. 1RQCh. 29.1 - Prob. 2RQCh. 29.1 - Prob. 3RQCh. 29.1 - Prob. 4RQCh. 29.1 - Prob. 5RQCh. 29.2 - Prob. 1RQCh. 29.2 - Prob. 2RQCh. 29.2 - Prob. 3RQCh. 29.2 - Prob. 4RQCh. 29.2 - Prob. 5RQ
Ch. 29.2 - Prob. 6RQCh. 29.2 - Prob. 7RQCh. 29.3 - Prob. 1RQCh. 29.3 - Prob. 2RQCh. 29.3 - Prob. 3RQCh. 29.3 - Prob. 4RQCh. 29.3 - Prob. 5RQCh. 29.3 - Prob. 6RQCh. 29.4 - Prob. 1RQCh. 29.4 - Prob. 2RQCh. 29.4 - Prob. 3RQCh. 29.4 - Prob. 4RQCh. 29 - Prob. 1SPACh. 29 - Prob. 2SPACh. 29 - Prob. 3SPACh. 29 - Prob. 4SPACh. 29 - Prob. 5SPACh. 29 - Prob. 6SPACh. 29 - Prob. 7SPACh. 29 - Prob. 8SPACh. 29 - Prob. 9APACh. 29 - Prob. 10APACh. 29 - Prob. 11APACh. 29 - Prob. 12APACh. 29 - Prob. 13APACh. 29 - Prob. 14APACh. 29 - Prob. 15APACh. 29 - Prob. 16APACh. 29 - Prob. 17APACh. 29 - Prob. 18APACh. 29 - Prob. 19APACh. 29 - Prob. 20APACh. 29 - Prob. 21APACh. 29 - Prob. 22APACh. 29 - Prob. 23APACh. 29 - Prob. 24APA
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- Consider the market for loanable funds.if expectations about South Africa's future economic performance are negative such that firms cancel plans to build new equipment and factories then in the short run we would expect i. Demand for loanable funds to increase ii. Supply of loanable funds to decrease iii.supply wi increase and demand for loanable funds to decrease iv. Interest rate to decreasearrow_forwardSuppose that the government changes the tax code to allow additional amounts of money to be placed in 401(k) retirement accounts, increasing the extent to which people can delay their tax obligations. Show the effect by shifting the appropriate curve in the market for loanable funds.arrow_forwardIf the interest rate in the loanable funds market is currently below the equilibrium level, then the quantity of funds demanded is ____ the quantity of funds supplied, and we can expect the interest rate to _______ over time. Group of answer choices less than : decrease greater than : decrease less than : increase greater than : increasearrow_forward
- Which event could be expected to shift a nation's demand for loanable funds, as shown in the accompanying graph? Interest rate Investment an increase in the productivity of capital a decrease in investor confidence a decrease in consumer wealth an increase in time preferences a drop in the number of retired workersarrow_forwardSuppose that the government is concerned with the unemployment rate and, as a response, offers a tax credit to any firm that builds a new factory in the United States. Show the effect of this policy on the market for loanable funds by shifting the appropriate curve in the graph in the attached image.arrow_forwardExplain how avoiding interest rate hikes could assist in accelerating economic growtharrow_forward
- Discuss why financial markets are important to a healthy economy and how they contribute to economic growth.arrow_forwardExpecting an improving economy will generally cause an increase in investment that shifts the _____ curve for loanable funds to the _____. a. supply; left b. supply; right c. demand; left d. demand; rightarrow_forwardAnalyse the link between finance and economic growth.arrow_forward
- How does the lack of collateral value affect economic growth? Discuss its impact on 1) capital investment and 2) productivity.arrow_forwardFigure 26-5. Figure 26-5 shows the loanable funds market for a closed economy. Interest Rate 7% 6% 5% D S $75 $100 $125 Loanable Funds Refer to Figure 26-5. Starting at point A, a reduction in government spending would cause a) the quantity of loanable funds traded to increase to $125 and the interest rate to fall to 5% (point D). b) the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to 7% (point E). c) the quantity of loanable funds traded to increase to $125 and the interest rate to rise to 7% (point C).arrow_forwardWhy is well-functioning financial system is a critical ingredient in achieving long-run growth? It ensures that savings are channeled towards productive investment projects efficiently. It ensures that savings are avaialble during economic downturns. It allows funds for economic recoveries. It facilitates international trade.arrow_forward
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