17. Use the market for loanable funds shown in the accompanying diagram to explain what happens to private savings, private investment spending, and the interest rate if each of the following events occur. Assume that there are no capital inflows or outflows. a. The government reduces the size of its deficit to zero. 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 fir of invest

17. Use the market for loanable funds shown in the accompanying diagram to explain what happens to private savings, private investment spending, and the interest rate if each of the following events occur. Assume that there are no capital inflows or outflows. a. The government reduces the size of its deficit to zero. 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 fir of invest

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 LOANABLE FUNDS (Billions of doll Demand -0- Demand 10 Supply
Based on this model, the budget deficit leads to in the level of investment and in the interest rate. Which of the following arguments might a supporter of a balanced budget make in defense of their position? Check all that apply. An individual's share of the government debt represents only a small portion of his or her lifetime earnings. Budget deficits decrease national saving. Budget deficits increase national saving. Budget deficits place a burden on future taxpayers. Supporters of a balanced budget claim that the government's budget deficit cannot grow forever, but critics believe that this is not necessarily true. They argue that what matters is the size of debt relative to national income. For example, suppose that real output in the United States grows at approximately 6%. If the inflation rate is 3% per year, this means that nominal income must be growing at a rate of % per year. Because nominal income grows over time, the nation's ability to pay back the national debt than…
58. Consider the long-run theory of investment, saving, and growth. Suppose the government has a budget deficit of $600. If the country's level of national saving is $200, then private saving must be $400. $200. $800. -$400. $600.
The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumers will be affected if the budget deficit increases to $250 billion per year. b. Assuming taxpayers do not anticipate an increase in the future market rate of interest due to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds. c. How would your conclusion differ if taxpayers fully anticipate future tax increases to offset the increase in the budget deficit? d. Do you think the Ricardian Equivalence is realistic?
41. Suppose that government institutes an investment tax credit and such policy generates an increase in the government budget deficit. This would: a. shift the saving curve (i.e. supply of loanable funds) to the left. b. cause the real interest rate to fall.
7 1) Suppose that the government spending decreases. Use the model of loanable funds in a closed economy to explain clearly what happens to the quantity of national savings, public savings, private savings, investment, consumption, and the interest rate: Illustrate the answer with the appropriate graph.
5. The government of an economy has increased its spending and its taxes by the same amount. i) What is the effect on investment? Use loanable funds market framework to illustrate your answer graphically and explain in words. ii) Does higher marginal propensity to consume amplify this effect or not? Explain your answer analytically. 2nd time submitting as a post, please answer this problem fully and explain work. Please answer graphically and use words as prescribed Please explain results fully. Use graph please as well. The first time I submitted this I was given a partial answer that I believe to be inaccurate for merely half the problem and that used no graph. Macmillan macroeconomics textbook is a good reference.
1) Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if: a reduction in military spending moves the government’s budget from deficit into surplus. 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.
4. Supply and demand for loanable funds 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. INTEREST RATE (Percent) 10 9 1 0 0 Supply 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 Suppose the interest rate is 4.5%. Based on the previous graph, quantity of loanable funds supplied is demanded, resulting in a of loanable funds. This would encourage lenders to the quantity of loanable funds supplied and the equilibrium interest rate of % than the quantity of loans the interest rates they charge, thereby the quantity of loanable funds demanded, moving the market toward
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Suppose the long-term real interest falls. In the (private sector) loanable funds market. the result will be. a. the demand for loanable funds curve shifts to the right b. the supply of loanable funds curve shifts to the left c. the demand for Ioanable funds curve does not shift to the right nor does the supply of loanable funds cunve shift to the left d. the demand for loanable funds curve shifts to the right and the supply of loanable funds curve shifts to the left
Qq.45. Subject :- Economy