In the Loanable Funds Market Model, ceteris paribus, it typically follows that when the federal government runs a budget deficit, there will be_ pressure on interest rates and pressure on private investment. This is referred to as Select one: O a. upward; upward; crowding out O b. upward; downward; crowding out c. downward; downward; financial intermediation d. downward; upward; financial intermediation.

In the Loanable Funds Market Model, ceteris paribus, it typically follows that when the federal government runs a budget deficit, there will be_ pressure on interest rates and pressure on private investment. This is referred to as Select one: O a. upward; upward; crowding out O b. upward; downward; crowding out c. downward; downward; financial intermediation d. downward; upward; financial intermediation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Use the diagram below to answer the question. O A OF O C OE Which point corresponds to level of consumption and investment in the economy when private savings is equal to investment? OD O Hayekian Triangle B I SLF DLE S&I SLF + MS
Which of the following is not an argument by those who oppose tax-law changes to encourage saving? O A. Saving is not very responsive to changes in the tax rate. O B. Saving is not an important determinant of a nation's ability to produce output. OC. Reducing the budget deficit instead of changing the tax laws could raise saving. O D. Changes in the tax laws to induce saving would distribute the tax burden less fairly.
6. If deficit spending "crowds out" some private investment, could fututre generations be worse off? If external financing eliminates crowding out, are future generations thereby protected?
1. The opportunity cost of holding money Suppose you've just inherited $10,000 from a relative. You're trying to decide whether to put the $10,000 in a non-interest-bearing account so that you can use it whenever you want (that is, hold it as money) or to use it to buy a U.S. Treasury bond. The opportunity cost of holding the inheritance as money depends on the interest rate on the bond. For each of the interest rates in the following table, compute the opportunity cost of holding the $10,000 as money. Interest Rate on Government Bond Opportunity Cost (Dollars per year) (Percent) 10 What does the previous analysis suggest about the market for money? The quantity of money demanded increases as the interest rate rises. The quantity of money demanded decreases as the interest rate rises. The supply of money is independent of the interest rate.
Consumption expenditure: Investment expenditure: Government budget balance Money demand C = 100 +0.8 Ya I= 120 – 500i Deficit of 50 200 2000 i + 0.1Y Money supply: Lump-sum taxes: Current account T=150 = 0 MD M= 100 %3D Where i is the interest rate, Y is the real GDP; Ya is the disposable income What is the equilibrium Y? Select one: O a. 1285 cross c O b. 675 cross O c. 700 cross O d. 1000 cros cros O e. None of the above
5. Consider the long-run theory of investment, saving, and growth. Suppose the government has a budget deficit of $400. If the country's level of national saving is $200, then private saving must be a $800. b. $200. C. $400. d. $400.
4 Consider a small open economy with a perfectly elastic supply of savings at interest rate 7*, which is below the interest rate which would have prevailed in the economy if it could not have borrowed, and a normal investment curve. Show the market equilibrium, including the magnitude of foreign bon-owing. a Now show the effect of an increased budget deficit. b Show the effect of an increased budget deficit which originates as a result of increased public investment, in which the public investment is a complement to private investment.
True or False: Negative debt always carries a high interest rate and high fees. O True O False
9. Problems and Applications Q9 Investment can be increased both by reducing taxes on private saving and by reducing the government budget deficit. True or False: It is possible to implement both of these policies at the same time because reducing taxes on private spending has the effect of decreasing the government budget deficit. O True False What would you need to know in order to judge which of these two policies would be more effective way to raise investment? Check all that apply. ✓ The elasticity of private saving with respect to the after-tax real interest rate The responsiveness of private saving to increases in investment ✔The response of private saving to changes in the government budget deficit
71
2. The opportunity cost of holding assets as money Suppose you've just inherited $10,000 from a relative. You're trying to decide whether to put the $10,000 in a non-interest-bearing account so that you can use it whenever you want (that is, hold it as money) or to use it to buy Government of Canada securities. The opportunity cost of holding the inheritance as money depends on the interest rate on the bond. For each of the interest rates in the following table, compute the opportunity cost of holding the $10,000 as money. Interest Rate on Government Securities Opportunity Cost (Dollars per year) (Percent) 8 10 What does the previous analysis suggest about the market for money? the interest rate rises. The quantity of money demanded increases O The supply of money is independent of the interest rate.. O The quantity of money demanded decreases as the interest rate rises.
What is the correct answer?