Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. 5. The market for loanable funds and government policyThe following graph shows the loanable funds market. For each of the given scenarios, adjust the appropriate curve on the graph to help you completethe questions that follow. Consider each scenario separately by returning the graph to its starting position when moving from one scenario to the next.(Note: You will not be graded on any changes you make to the graph.)INTEREST RATE (Percent)SupplyDemandLOANABLE FUNDS (Billions of dollars)DemandSupply(? Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or depositsis taxed at a rate of 18%. Now suppose there is a decrease in the tax rate on interest income, from 18% to 14%.Shift the appropriate curve on the graph to reflect this change.This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds tospending toScenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital within some relevant time period. Supposethe government implements a new investment tax credit.Shift the appropriate curve on the graph to reflect this change.The implementation of the new tax credit causes the interest rate toThis change in spending causes the government to run a budgetScenario 3: Initially, the government's budget is balanced; then the government significantly increases spending on national defense without changingtaxes.Shift the appropriate curve on the graph to reflect this change.and the level of saving toThis causes the interest rate towhichand the level of investmentthe level of investment spending.national saving.

Loanable Funds Market: In the market for loanable funds there are economic agents like governments,…

5. The market for loanable funds and government policy The following graph shows the loanable funds market. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Consider each scenario separately by returning the graph to its starting position when moving from one scenario to the next. (Note: You will not be graded on any changes you make to the graph.) INTEREST RATE (Percent) Supply Demand LOANABLE FUNDS (Billions of dollars) Demand. Supply

5. The market for loanable funds and government policy The following graph shows the loanable funds market. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Consider each scenario separately by returning the graph to its starting position when moving from one scenario to the next. (Note: You will not be graded on any changes you make to the graph.) INTEREST RATE (Percent) Supply Demand LOANABLE FUNDS (Billions of dollars) Demand. Supply

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 6P

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U3e the tollowing graph to show the effects on the Market for Loanable Funds of businesses discovering they have more than enough capital to meet the demand for their goods: Instructions: Drag the demand curve to illustrate the appropriate change in demand. Market for Loanable Funds Interest Rate 100 Supply (Savings) 90 80 70 60 50 Demand (Investment) 40 30 20 10 10 20 30 40 50 60 70 80 90 100 Dollar volume of Savings, Investment
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.
8- Describe how the following statements affect either the supply or the demand for loanable funds. For each statement below, do the following: Explain whether the event affects either the demand or the supply of loanable funds. Describe how the statement will affect the equilibrium interest rate and quantity of loanable funds. Draw a graph to demonstrate each answer. Please remember to label each part of the graph. Indicate the change in the interest rate and the quantity of loanable funds on your graph. Analyze each event independently. (Hint: Review the slides and recordings of Lecture 4 for similar graphical analysis). Statements: a) "The national-level saving rate is important from a macroeconomic perspective, in the sense that higher savings tend to strengthen the economy over the long run." b) “Slow-trend growth is reducing the opportunities for profitable long-term investments. The recent downturn in business investment was less of a cyclical blip than a sign of things to…
1. In the model of the market for loanable funds, which of the following best describes why the supply curve is upward sloping? a The higher the interest rate, the more likely households are to spend b The higher the interest rate, the less likely firms are invest c The higher the interest rate, the more likely households are to borrow d The higher the interest rate, the more likely households are to save
5. 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 _____…
Show the effect on the real interest rate and equilibrium quantity of loanable funds of an increase in the demand for loanable funds and a smaller increase in the supply of loanable funds. 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. Real interest rate (percent per year) 12.0 Draw a curve that shows an increase in the demand for loanable funds. Label it DLF,. 10.0- Draw a curve that shows a smaller increase in the supply of loanable funds. Label it SLF,. Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2. 8.0- 6.0- 4.0- 2.0- 0.0+ 0.0 1.0 2.0 3.0 Loanable funds (trillions of 2012 dollars) 4.0 5.0 >>> Draw only the objects specified in the question. Click the graph, choose a tool in the palette and follow the instructions to create your graph. MacBook Air DD DII F11 F10 F9 000 000 F8 F7…
Suppose the government changes the tax code, allowing individuals to reduce their taxable income if they save money in registered retirement savings plans (RRSPs). Your response should answer the following questions: State and explain which loanable funds curve would this policy affect? Which way would the loanable funds curve shift? What would be the impact on interest rates? Draw the loanable funds diagram to illustrate your answers for a to c.
Use the loanable funds market to illustrate the effect of the following events on the equilibrium. Illustrate the effects on the interest rate and quantity of investment-savings a) The proportion of retired people in the population goes up. Think that usually retired people generally save less than working people at any interest rate. b) At any given interest rate, consumers decide to save more (assume the budget balance is zero). c) At any given interest rate, businesses become very optimistic about the future profitability of investment spending (assume the budget balance is zero).
c. If the Federal Reserve sells government bonds, show what will happen to this graph. Explain the effects on interest rates and the quantity of loanable funds
5. 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.) Customize and control Google Chrome Supply Demand Supply Demand LOANABLE FUNDS (Billions of dollars) 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 an increase in the maximum contribution, from $5,000 to $8,000 per year. INTEREST RATE (Percent)
5. 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.) INTEREST RATE (Percent) Supply Demand LOANABLE FUNDS (Billions of dollars) Demand Supply (?) 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.
7- We have the following data from the loanable funds market for Berberistan. Answer the following questions. Real interest rate Loanable funds Loanable funds supplied (trillions of dollars) demanded (percent per year) 3 10 4 4 5 8. 6. 6. 7 7 7 8 9. 9 4 10 a) What is the equilibrium real interest rate, total private saving and investment? (suppose that the government budget is balanced.) b) What will be the equilibrium real interest rate if the government's budget becomes a deficit of $2 trillion? What will be the private investment at the new equilibrium? Define "crowding-out" and tell if there is crowding-out in this case.