The following graph shows the market for loanable funds. On the graph, show the effects of an increase in the prices of food and other products of agriculture the market for loanable funds. Supply Demand Supply Demand QUANTITY OF LOANABLE FUNDS The equilibrium interest rate as a result of an increase in the price of agricultural output. INTEREST RATE (Percent)
Q: (10 pts) Describe how the following statements affect either the supply or the demand for loanable…
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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, InvestmentThe following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. 10 Supply 8 Demand 100 200 300 400 500 600 700 800 900 1000 LOANABLE FUNDS (Billions of dollars) is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied increases v Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is v than the quantity of loans demanded, resulting in a v of loanable funds. This would encourage lenders to v the interest rates they charge, thereby v the quantity of loanable funds supplied and v the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of 5% . INTEREST RATE (Percent)Jse ule following graph to show the effects on the Market for Loanable Funds of many people deciding to play the lottery rather than save money for retirement: Instructions: Drag the supply curve to illustrate the appropriate change in supply. Market for Loanable Funds Interest Rate 100 90 Supply (Savings) 80 70 60 50 40 Demand (Investment) 30 20 10 10 20 30 40 50 60 70 80 90 100 Dollar volume of Savings, Investment
- The graph characterizes a market for loanable funds. Shift the appropriate curves to indicate what will happen to the market if the government grants a new corporate tax credit for business investment. (Look at image) After this change, the real interest rate decreases and the quantity of loanable funds increases. the real interest rate decreases and the quantity of loanable funds decreases. the real interest rate increases and the quantity of loanable funds decreases. the real interest rate increases and the quantity of loanable funds increases.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).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
- The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. 8 7 Supply 4 3 2 Demand 1 100 200 300 400 500 600 700 800 LOANABLE FUNDS (Billions of dollars) is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded Suppose the interest rate is 3.5%. Based on the previous graph, the quantity of loanable funds supplied is than the quantity of loans demanded, resulting in a of loanable funds. This would encourage lenders to the interest rates they charge, thereby the quantity of loanable funds supplied and the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of % INTEREST RATE (Percent)The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. 8 7 Supply 6 400, 4 Demand 100 200 300 400 500 600 700 800 LOANABLE FUNDS (Billions of dollars) INTEREST RATE (Percent)Use the graph to answer the question that follows. Real interest rate % r Dif q q' Quantity of loanable funds $ The graph shows a change in an economy after the government's decision to provide tax benefits to businesses in an effort to increase investment. What is the new point of equilibrium in the economy's loanable funds market? O o Or O o O q Or o' Sif D'If
- Consider a loanable funds market of Pakistan. Suppose, if government want to implement the policy to provide incentives on savings by allowing people to shield their savings by opening Retirement Accounts with commercial banks. What is the effect of this policy on the market for loanable finds Interest rate will (Please write one word either increase or decrease ) Quantity of loanable funds will(Please write one word either increase or decrease) Now assume, the parliament passed a tax reform aimed at making investment more attractive—for instance, by instituting an investment tax credit. An investment tax credit gives a tax advantage to any firm building a new factory or buying a new piece of equipment What is the effect of this policy on the market for loanable finds Interest rate will (Please write one word either increase or decrease) Quantity of loanable funds will((Please write one word either increase or decrease)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.Again, the following graph depicts the market for loanable funds. An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government repeals a previously existing investment tax credit. Shift the appropriate curve(s) on the following graph to show the impact of this policy. INTEREST RATE (Percent) pemand Supply QTY OF LOANABLE FUNDS (Billions of dollars) The repeal of the previously existing tax credit causes the interest rate to and the level of investment to