8-Describe how the following statements affect either the supply or the demand forloanable 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 ofloanable funds.Draw a graph to demonstrate each answer. Please remember to label each part of thegraph. Indicate the change in the interest rate and the quantity of loanable funds onyour graph. Analyze each event independently. (Hint: Review the slides andrecordings of Lecture 4 for similar graphical analysis).Statements:a) "The national-level saving rate is important from a macroeconomic perspective, inthe sense that higher savings tend to strengthen the economy over the long run."b) “Slow-trend growth is reducing the opportunities for profitable long-terminvestments. The recent downturn in business investment was less of a cyclical blipthan a sign of things to come."c) "Government increased its expenditure on national defense which is expected toincrease budget deficit."

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Answered: "The national-level saving rate is…

"The national-level saving rate is important from a macroeconomic perspective, in he sense that higher savings tend to strengthen the economy over the long run."

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.
K Consider the graph to answer the following questions: a. The shift from S, to S₂ represents in the supply of loanable funds. b. With the shift in supply, the equilibrium quantity of loanable funds c. With the change in the equilibrium quantity of loanable funds, the quantity of saving and the quantity of investment ▼ C Real Interest Rate Market for Loanable Funds L241 Loanable Funds ($ per year) S2 S1
1. Suppose the government borrows $20 million more next year than this year. a. How does the elasticity of the supply of loanable funds affect the size of thesechanges? b. How does the elasticity of the demand of loanable funds affect the size of thesechanges?
Real interest rate (percent per year) 10 8 6 4 2 0 1 SLF DLF 2 5 6 Loanable funds (trillions of 2009 dollars) 4) Using the figure above, show the effect on the real interest rate and the quantity of loanable funds of an increase in expected profit.
Use the graph to answer the question that follows. Quantity of Loanable Funds (S) Assume that the loanable funds market is in equilibrium, as shown in the graph.If households become concerned about retirement income and spend less,what will happen in this market for loanable funds? O The demand for funds will increase, as will the equilibrium interest rate. O Both the demand for funds and the supply of funds will decrease, with an indeterminate impact on the equilibrium interest rate. ) The demand for funds will decrease, and the equilibrium quantity of funds transacted will erease below Fo. O Both the demand for funds and the supply of funds will icrease, with an increase in the quantity of funds transacted. O The supply of funds will increase, and the equilibrium interest rate wi fall blow ro. Real Interest Rate
Suppose the government borrows $20 million more next year than this year. a. Draw and fully label a diagram to illustrate the market for loanable fund to analyze this policy. How does the elasticity of the supply of loanable funds affect the size of these changes? How does the elasticity of the demand of loanable funds affect the size of these changes?
K Consider the graph to answer the following questions: a. The shift from S, to S₂ represents in the supply of loanable funds. b. With the shift in supply, the equilibrium quantity of loanable funds c. With the change in the equilibrium quantity of loanable funds, the quantity of saving and the quantity of investment ▼ A CI Real Interest Rate Market for Loanable Funds L₂ L1 Loanable Funds ($ per year) S₁ Q
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?
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
Question 20 The market for loanable funds Real interest | rate (per cent) Equilibrium interest rate Demand for loanable funds Equilibrium quantity of loanable funds Loanable funds (dollars) per year) Refer to the above diagram to answer the following question. The supply of loanable funds has a O negative; greater; lesser O negative; lesser; greater O positive; greater; greater O positive; lesser; lesser Supply of loanable funds slope because the greater the interest rate, the the reward for savings, and the the quantity of loanable funds supplied.
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).