Demand Supply Supply Demand LOANABLE FUNDS (Billions of dollars) Scenario 1: Individual Retirement Accounts (IRAS) allow people to shelter some of their income on. 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. 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 to and the level of investment spending to Scenario 2: 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 on the graph to reflect this change. The repeal of the previously existing tax credit causes the interest rate to and the level of investment to Scenario 3: Initially, the government's budget is balanced; then the government responds to the conclusion of a war by significantly reducing defense spending without changing taxes. This change in spending causes the government to run a budget which national saving. Shift the appropriate curve on the graph to reflect this change. This causes the interest rate to the level of investment spending. INTEREST RATE (Percent)

What is the formula for calculating Net Present Value (NPV)? a) NPV = Total Revenue - Total Costs b) NPV = Total Costs - Total Benefits c) NPV = Initial Investment - Total Revenue d) NPV = Total Benefits - Initial Investment

Steve Forbes ran for U.S. president in 1996 and 2000 on a platform proposing a 17% flat tax, that is, an income tax that would simply be 17% of each tax payer's taxable income. Suppose that Alice was single in the year 2016 with a taxable income of $29,000. If the 17% flat tax proposed by Mr. Forbes had been in effect in 2016, what would Alice's tax have been?

On the following graph, show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves. Supply X Demand 2 10 20 30 40 50 QUANTITY OF LOANABLE FUNDS (Billions of dollars) 12 IN TEREST RATE 10 0 0 60 ģ Demand Supply ? Suppose that for each one-percentage-point increase in the interest rate, the level of investment spending declines by $1.25 billion. by According to the change you made to the loanable funds market in the previous scenario, the increase in government purchases causes the interest rate in the money market to from 6% to %. The change in the interest rate causes the level of investment spending to $ billion. by After the multiplier effect is accounted for, the change in investment spending will cause the quantity of output demanded to $ billion at each price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is known as the effect. Place the purple line (diamond…

In the standard loanable funds market graph, …   …an increase in the supply of loanable funds (rightward shift)...     Group of answer choices A) none of the other options. B) could be caused by a tax increase for individuals on interest earned from savings accounts. C) would cause an increase in the real interest rate. D) could be caused by a tax break for businesses on investment spending. E) would cause a decrease in the real interest rate.

Scenario 2: 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 on the graph to reflect this change. The repeal of the previously existing tax credit causes the interest rate to and the level of investment to

Scenario 21-3  Scott knows that he will ultimately face retirement. Assume that Scott will experience two periods in his life, one in which he works an earns income, and one in which he is retired and earns no income. Scott can earn $250,000 during his working period and nothing in his retirement period. He must both save and consume in his work period with an interest rate of 10 percent on savings.  Refer to Scenario 21-3. If the interest rate on savings increases,  a. Scott will always increase his savings in the work period.  b. Scott will increase his savings in the work period if the income effect is greater than the  substitution effect for him.  c. Scott will decrease his savings in the work period if the income effect is greater than the substitution effect for him.  Od. Scott will decrease his savings in the work period if the substitution effect is greater than the income effect for him.  C

John has the following utility function U(C₁, C2) = min{c₁ + ac2, C2}, where C₁ and c₂ are his consumption in periods 1 and 2, respectively and a is some positive constant. Suppose John has $100 income in period 1 and $105 income in period 2. Prices in both periods are $1. Question 2 Part al Suppose a = 2. If John can freely borrow and lend at 5% interest rate what would be his optimal consumption in both periods? 1 Question 2 Part a2 Suppose a = 2. Now, John can lend at 5% interest rate, but can't borrow at all. What would be his optimal consumption in both periods? Question 2 Part bl Suppose a 0.5. If John can freely borrow and lend at 5% interest rate what would be his optimal consumption in both periods? Question 2 Part b2 Suppose a 0.5. Now, John can lend at 5% interest rate, but can't borrow. What would be his optimal consumption in both periods?

The graph illustrates the demand for loanable funds and the private supply of loanable funds when the government budget is balanced.   In the graph, draw the supply of loanable funds curve if the government budget surplus is $0.2 trillion. Label the curve.   Draw a point to show the new equilibrium real interest rate and quantity of loanable funds.   >>> Draw only the objects specified in the question.

Calua is an economy in which people live for three periods. They receive an endowment in only one period as follows: 80 goods when young, or 90 goods when middle-aged or 115 goods when old. The real interest rate in Calua is 10%. Given this information, what endowment should a typical person choose? Assume the interest rate increases to 15%. Which endowment should a typical person now choose?