If the government instituted an investment tax credit, then which of the following would be higher in equilibrium? Use the loanable funds model to answer. O a. Neither the saving nor the interest rate O b. The saving but not the interest rate O c. The saving and the interest rate O d. The interest rate but not the saving

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium? Use the loanable funds model to answer. O a. Neither the saving nor the interest rate O b. The saving but not the interest rate O c. The saving and the interest rate O d. The interest rate but not the saving

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 9P

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Suppose the government runs fewer budget deficit and there is a decrease in the average household income. Then, O The new EQ quantity of loanable funds would be indeterminate, , but the new EQ interest rate would increase. O The new EQ quantity of loanable funds would decrease, but the new EQ interest rate would be indeterminate. O The new EQ quantity of loanable funds would be indeterminate, , but the new EQ interest rate would decrease. The new EQ quantity of loanable funds would be indeterminate, but the new EQ interest rate would increase. The new EQ quantity of loanable funds would increase, but the new EQ interest rate would be indeterminate.
Suppose the market for loanable funds is currently in equilibrium. Which of the following factors will cause an increase in the interest rate? Select one: O a. An increase in the household saving rate O b. An expansionary monetary policy Oc. An increase in business confidence O d. A decrease in government budget deficits Travis buys a 20-year, $10,000 US Treasury bond with a coupon rate of 5%. After three years, he has some unexpected expenses and decides to sell the bond. In which market will Travis sell his bond? Select one: O a. The secondary bond market O b. The primary bond market O c. The Treasury bond market Od. The T-bond market
A government budget deficit occurs, which The real interest rate O A. decreases the supply of loanable funds; falls O B. decreases the supply of loanable funds; rises C. decreases the demand for loanable funds; falls O D. increases the demand for loanable funds; rises
Interest Rate 0 Multiple Choice O O A O S₁ BC Quantity Refer to the diagram. Suppose that the demand for loanable funds is D₁ and the supply of loanable funds initially is S₁. If the supply of loanable funds increases to So, the equilibrium quantity of funds borrowed will increase from E to F. increase from A to B. increase from B to C. So decrease from G to F. Do D₁
a. The supply of loanable funds slopes upward because O higher interest rates make it more costly to borrow. O savers will make more funds available at lower interest rates. O investors will want more money made available at higher interest rates. savers will make more funds available at higher interest rates. b. The demand for loanable funds slopes downward because O few investment projects yield a high rate of return. O many investment projects yield an equal.rate of return. O many investment projects yield a high rate of return. O few investment projects yield a low rate of return.
a. The supply of loanable funds slopes upward because O higher interest rates make it more costly to borrow. savers will make more funds available at lower interest rates. O investors will want more money made available at higher interest rates. savers will make more funds available at higher interest rates. b. The demand for loanable funds slopes downward because few investment projects yield a high rate of return. many investment projects yield an equal rate of return. many investment projects yield a high rate of return. O few investment projects yield a low rate of return. c. The equilibrium interest rate is determined where the interest rate is equal to O the amount of loanable funds. O the expected rate of return. O the expected rate of spending. O expected personal income.
Question 4 Suppose congress pass a law that offers a tax credit for firms that built new factories in the U.S. Then the O a. supply of loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate. O b. demand for loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate. O c. demand for loanable funds would shift rightward, initially creating a surplus of loanable funds at the original interest rate. O d. supply of loanable funds would shift rightward, initially creating a surplus of loanable funds at the original interest rate.
A good example of a policy to increase an economy's saving rate is_ a. to reduce poverty O b. to reduce interest rates O c. to increase government spending © d. to increase sales taxes e. to increase the economic growth rate
If new technology makes existing capital obsolete and labour less productive, what are the effects in the loanable funds market according to some economists? Please choose all answers that apply. O A. A decrease in the real interest rate results. O B. The quantity supplied of loanable funds decreases. O c. Investment decreases. O D. An increase in the real interest rate results. OE. The demand for loanable funds increases.
An increase in the real interest O A. increases savings for borrowers, and decreases the savings of lenders. O B. decreases savings for borrowers, but has an uncertain effect on the savings of lenders. O C. increases savings for borrower, but has an uncertain effect on the savings of lenders. O D. has an uncertain effect on the savings of both borrowers and lenders. O E. reduces savings for both borrowers and lenders.
6. In macroeconomist mind, Explain how they are able to distinguish the terms between investment and saving. Then explain this condition either entering investment or saving and explain why you choose it. a. When your family takes out a loan from the banks and buys a new house. b. When you use your $250 paycheck to buy stock in UNILEVER. c. When your friend earns $50 and deposits it in his account at the bank. d. When you borrow $2,000 from a bank to buy a car to use in your business.
In the Loanable Funds Market Model, ceteris paribus, which of the following events would best explain an increase in interest rates, together with a decrease in investment? Select one: a. The government went from running a budget surplus to running a budget deficit. b. Private investors anticipate a higher return on their private-sector investments in the future. O c. The government reduced the tax rate on savings income. O d. None of the above is correct.