Macroeconomics
13th Edition
ISBN: 9780134744452
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 7, Problem 29APA
(a)
To determine
Explain the inverse relation between
(b)
To determine
Identify the changes in the
(c)
To determine
Identify the change in the supply of loanable funds due to the change in the demand for loanable fund.
(d)
To determine
Identify the changes in the demand for loanable funds and the real interest rate due to the economic expansion.
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Textbook: Macroeconomics by P. Krugman & R. Wells (5th Edition)
Using the accompanying diagram, explain what will happen to the market for loanable funds when there is a fall of percentage points in the expected future inflation rate. How will the change in the expected future inflation rate affect the equilibrium quantity of loanable funds?
Graphically Show each scenario of the market for loanable funds and graph the supply and demand for each of the 4 scenarios. Draw the shift occurring (Supply or Demand) and explain what happens to the equilibrium interest rate in for each of the 4 scenarios
1. A breakthrough in medical technology results in many hospitals wanting to buy new equipment.
2. The government budget deficit is reduced by 50%.
3. Foreign investors buy residential property in the United States.
4. People around the world are worried about financial stability in their countries and choose to move their wealth to U.S. financial markets.
In detail what are some of the factors that affect demand for loanable funds according to the loanable funds theory of interest rate determination and what impact would these have on the demand and supply of funds and on the interest rate
Chapter 7 Solutions
Macroeconomics
Ch. 7.1 - Prob. 1RQCh. 7.1 - Prob. 2RQCh. 7.1 - Prob. 3RQCh. 7.1 - Prob. 4RQCh. 7.2 - Prob. 1RQCh. 7.2 - Prob. 2RQCh. 7.2 - Prob. 3RQCh. 7.2 - Prob. 4RQCh. 7.2 - Prob. 5RQCh. 7.3 - Prob. 1RQ
Ch. 7.3 - Prob. 2RQCh. 7.3 - Prob. 3RQCh. 7.3 - Prob. 4RQCh. 7.3 - Prob. 5RQCh. 7.3 - Prob. 6RQCh. 7.4 - Prob. 1RQCh. 7.4 - Prob. 2RQCh. 7.4 - Prob. 3RQCh. 7 - Prob. 1SPACh. 7 - Prob. 2SPACh. 7 - Prob. 3SPACh. 7 - Prob. 4SPACh. 7 - Prob. 5SPACh. 7 - Prob. 6SPACh. 7 - Prob. 7SPACh. 7 - Prob. 8SPACh. 7 - Prob. 9SPACh. 7 - Prob. 10SPACh. 7 - Prob. 11SPACh. 7 - Prob. 12SPACh. 7 - Prob. 13APACh. 7 - Prob. 14APACh. 7 - Prob. 15APACh. 7 - Prob. 16APACh. 7 - Prob. 17APACh. 7 - Prob. 18APACh. 7 - Prob. 19APACh. 7 - Prob. 20APACh. 7 - Prob. 21APACh. 7 - Prob. 22APACh. 7 - Prob. 23APACh. 7 - Prob. 24APACh. 7 - Prob. 25APACh. 7 - Prob. 26APACh. 7 - Prob. 27APACh. 7 - Prob. 28APACh. 7 - Prob. 29APACh. 7 - Prob. 30APA
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Similar questions
- Explain what happens in an economy when the financial markets limit access to capital. How does this affect economic growth and employment?arrow_forwardRecently, the economies of North Korea and Norway have begun to grow very rapidly. This increases their citizens’ income and wealth as well. In turn, these citizens increase their savings not only in their country, but also in the United States. In this case, which of the following statements is correct? A. The supply of loanable funds decreases as savings increase. B. The supply of loanable funds increases as savings increase. C. The demand of loanable funds decreases as savings increase. D. Both supply and demand of loanable funds increase as savings increase.arrow_forwardRecently, the economies of North Korea and Norway have begun to grow very rapidly. This increases their citizens’ income and wealth as well. In turn, these citizens increase their savings not only in their country, but also in the United States. In this case, which of the following statements is correct? A. The supply of loanable funds decreases as savings increase. B. The supply of loanable funds increases as savings increase. C. The demand of loanable funds decreases as savings increase. D. Both supply and demand of loanable funds increase as savings increase. Clear my choicearrow_forward
- For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain! a bond of the U.S. government or a bond of an East European government a bond that repays the principal in year 2015 or a bond that repays the principal in year 2040 a bond from Coca-Cola or a bond from a software company you run in your garage a bond issued by the federal government or a bond issued by New York State 2. Many workers hold large amounts of stock issued by the firms at which they work. Why do you suppose companies encourage this behavior? Why might a person not want to hold stock in the company where he works? 3. Economists in Funlandia, a closed economy, have collected the following information about the economy for a particular year: Y = 10,000; C = 6,000; T = 1,500; G = 1,700. The economists also estimate that the investment function is: I =3,300 –100r where r is the country’s real interest rate, expressed as a percentage. Calculate private saving, public saving,…arrow_forwardFor each of the following pairs, which bond would you expect to pay a higher interest rate? Explain! a). a bond of the U.S. government or a bond of an East European government b). a bond that repays the principal in year 2015 or a bond that repays the principal in year 2040 c). a bond from Coca-Cola or a bond from a software company you run in your garage d). a bond issued by the federal government or a bond issued by New York Statearrow_forward
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