Figure: The Market for Loanable Funds II Reference: Ref 10-12 (Figure: The Market for Loanable Funds II) An increase in government borrowing will shift the demand for loanable funds to the: Interest rate r=8 Supply x E Q* = $300 left and increase the interest rate. left and decrease the interest rate. right and increase the interest rate. right and decrease the interest rate. Demand Quantity of loans

Figure: The Market for Loanable Funds II Reference: Ref 10-12 (Figure: The Market for Loanable Funds II) An increase in government borrowing will shift the demand for loanable funds to the: Interest rate r=8 Supply x E Q* = $300 left and increase the interest rate. left and decrease the interest rate. right and increase the interest rate. right and decrease the interest rate. Demand Quantity of loans

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Savings,investment And The Financial System

Section: Chapter Questions

Problem 8PA

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Figure: Loanable Funds Interest rate 9 S Reference: Ref 10-7 D $100 Quantity of loanable funds (billions of dollars) (Figure: Loanable Funds) Look at the figure Loanable Funds. Which of the following might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $75 billion? O Capital inflows from foreign citizens decline. O The federal government runs a budget deficit rather than a surplus. O Profit expectations for business investments become less optimistic. O The government eliminates taxes on income from interest earned.
The table below shows the amount of savings and borrowing in a market for loans to purchase homes, measured in millions of dollars, at various interest rates. InterestRate QuantitySupplied QuantityDemanded5% 98 2216% 129 1917% 160 1608% 178 1429% 196 12410% 214 106 What is the equilibrium interest rate and quantity of loaned funds? r = % Q = Suppose there is a decrease in demand of money, what will happen to interest rates and quantity? Increase in Interest Rates, Increase in Quantity?Increase in Interest Rates, Decrease in Quantity?Decrease in Interest Rates, Increase in Quantity?Decrease in Interest Rates, Decrease in Quantity?
The economy of Dream Island, which is isolated from the rest of the world, has the supply of loanable funds schedule and the demand for loanable funds schedule shown in the table below. As it happens, all of the supplies of loanable funds are from households' savings and the entre demand for loanable funds is from firms' investment demand. Real interest rate (percent per year) Supply of loanable funds (2005 dollars) Demand for loanable funds (2005 dollars) 5 2,000 5,000 7 3,000 4,000 9 4,000 3,000 11 5,000 2,000 a) Draw the demand and supply curves.
Use Figure: The Market for Loanable Funds with Government Borrowing. After an increase in government borrowing, the equilibrium interest rate will rise from 6% to Interest rate (%) 12 10 8 5 4 2 O %, and the amount of private savings will Supply of loanable funds Demand for loanable funds 10 20 30 40 50 60 70 80 90 100 Quantity of loanable funds (billions of dollars)
Show how an increase in the supply of loanable funds and a decrease in the demand for loanable funds can lower the real interest rate and leave the Real interest rate (percent per year) 12- equilibrium quantity of loanable funds unchanged. 10- Draw a demand for loanable funds curve. Label it DLF,. Draw a supply of loanable funds curve. Label it SLF,. Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. 8- 6- Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF,. Draw a curve that shows an increase in the supply of loanable funds. Draw it in such a way that the equilibrium quantity of loanable funds does not change. Label it SLF,. 4- 2- Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2. 0- Loanable funds (trillions of 2007 dollars) >>> Draw only the objects specified in the question.
Real interest rate (percent per year] SLF1 SLFO SLF2 Loanable funds (trillions of 2009 dollars) In the above figure, the economy is at point a on the initial supply of loanable funds curve SLFO. What happens if the real interest rate rises? Nothing; the economy would remain at point a. There would be a movement to a point such as b on supply of loanable funds curve SLFO. O The supply of loanable funds curve would shift rightward to a curve such as SLF2. The supply of loanable funds curve would shift leftward to a curve such as SLF1.
Suppose the government borrows $20 million more next year than this year. a. Draw and fully label a diagram to illustrate the market for loanable fund to analyze this policy. How does the elasticity of the supply of loanable funds affect the size of these changes? How does the elasticity of the demand of loanable funds affect the size of these changes?
Question 33 Figure 26-4 This figure shows the loanable funds market for a closed economy. INTEREST RATE (Percent) 15 10 5 E 60 P с 120 180 D LOANABLE FUNDS (Dollars) S₂ D₂ Refer to Figure 26-4. Starting at point A, the enactment of an investment tax credit would likely cause the quantity of loanable funds traded to a. increase to $180 and the interest rate to fall to 5% (point D). b. increase to $180 and the interest rate to rise to 15% (point C). C. decrease to $60 and the interest rate to fall to 5% (point B). d. decrease to $60 and the interest rate to rise to 15% (point E).
This figure shows the loanable funds market for a closed economy. INTEREST RATE (Percent) 09 2 E с 50 100 150 LOANABLE FUNDS (Dollars) D₂ o Refer to Figure 26-4. Starting at point A, the enactment of an investment tax credit would likely cause the quantity of loanable funds traded to increase to $150 and the interest rate to rise to 6% (point C). decrease to $50 and the interest rate to fall to 2% (point B). decrease to $50 and the interest rate to rise to 6% (point E). increase to $150 and the interest rate to fall to 2% (point D).
Interest rate 4% 3% + $50 500 530 0₂ D₁ Savings, investment, government borrowing (millions of dollars) Consider the graph of Nation A which is in recession and in order to increase the economy the government chooses to raise the spending and decides to borrow $ 50 million to construct famous economists statues. Decide which of the given statements is true? a) There will be an increase in investment spending beyond $530 million. b) There will be a decline in investment spending to $480 billion. c) There will be an increase in consumption of $30 million. d) There will be a net change in aggregate spending of 30 million.
(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. An increase in private savings will shift the supply curve for loanable funds to the causing the interest rate to. Interest rate r* = 6% E Supply
The following graph shows the loanable funds market in equilibrium at an interest rate of 3%. On the following graph, show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves. Supply Demand Supply Demand 10 20 QUANTITY OF LOANABLE FUNDS (BIllons of dollars) Suppose that for each one-percentage-point increase in the interest rate, the level of investment spending declines by $1 billion. According to the change you made to the loanable funds market in the previous scenario, the increase in government purchases causes the interest rate in the money market to from 3% to The change in the interest rate causes the level of investment spending to by bilion. After the multiplier effect is accounted for, the change in investment spending will cause the quantity of output demanded to by bilion at each price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is known as the…