Economics The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule when the government's budget is balanced Real interest rate Loanable funds demanded Loanable funds supplied (percent per year) (trillions of 2010 dollars) (trillions of 2010 dollars) 12 6 4 11 7 10 8 6 9 7 8 10 7 11 If the Ricardo-Barro effect occurs, and if the government budget deficit is $2 trillion, the real interest rate is percent a year and the quantity of investment is_ trillion. O A. 7.0, $8.0 O B. 7.0; $10 0 OC. 5.0; $10.0 OD. 6.0, $9.0

Economics The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule when the government's budget is balanced Real interest rate Loanable funds demanded Loanable funds supplied (percent per year) (trillions of 2010 dollars) (trillions of 2010 dollars) 12 6 4 11 7 10 8 6 9 7 8 10 7 11 If the Ricardo-Barro effect occurs, and if the government budget deficit is $2 trillion, the real interest rate is percent a year and the quantity of investment is_ trillion. O A. 7.0, $8.0 O B. 7.0; $10 0 OC. 5.0; $10.0 OD. 6.0, $9.0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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44. An increase in the general price level in the economy a) Will increase the purchasing power of consumers' wealth and decrease consumption spending. b) Will increase demand for, and decrease supply of loanable funds, causing the interest rate to increase which in turn will cause investment spending to fall. c) Makes domestic goods more expensive than foreign goods than before which will tend to decrease exports and increase imports, thus lowering net exports. d) All the above e) Only (b) and (c) are true
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.
Assumed that the government maintained a balanced budget initially. However, the financialsecretary underestimated the recovery of local economy and the budget surplus is resulted. How does the budget surplus affect the loanable fund market? How does this market restore the equilibrium? How is the ‘private sector spending’ affected by the ‘public sector spending’? Explain and illustrate with a well-labelled diagram.
When nominal interest rates are zero, the central bank can still lower them by printing money and purchasing bonds from banks. This increases the supply of loanable funds and stimulates lending.True/False and Explain
There is $10 trillion in the loanable funds market. $6 trillion in private borrowing and $4 trillion in government borrowing. The federal government increases its borrowing to $5 trillion, crowding out $1 trillion in private borrowing. Interest rates remain the same. Make an argument that the GDP remains the same and that we don’t care about the crowding out.
The graphs below depict the loanable funds market and the relationship between real interest rates and the level of net capital outflow (NCO) calculated in terms of the Mexican peso. REAL INTEREST RATE (Percent) 8 8 10 3 1 The Market for Loanable Funds in Mexico + 0 1 2 3 4 Supply Demand 5 6 LOANABLE FUNDS (Billions of pesos) Initial state After capital flight 7 8 (?) REAL INTEREST RATE (Percent) Complete the first row of the table to reflect the state of the markets in Mexico. Real Interest Rate Net Capital Outflow (NCO) (Percent) (Billions of pesos) Mexican Net Capital Outflow 8 7 6 10 5 4 3 2 NÇO + # -3 -2 -1 0 1 2 3 4 5 NET CAPITAL OUTFLOW (Billions of pesos) 6 (?) Suppose now that a sudden bout of political turmoil in Mexico causes world financial markets to become uneasy. Because investors now see Mexico as unstable, they decide to pull a portion of their assets out of Mexico and put them into more stable economies. This unexpected shock to the demand for assets in Mexico is…
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.
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Qq.45. Subject :- Economy
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.
17. What makes up the supply curve in the loanable funds market? Why does this curve have a positive relationship with the real interest rate?