Use the analysis for the market for loanable funds diagrams to examine and explain both in words and diagrammatically how the following government policy affect the economy’s saving and investment. Policy 1: Suppose the government passed a tax reform giving an investment tax credit to any firm building a new factory or buying a new piece of equipment.

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. Supply 5 Demand 1 100 200 300 400 500 600 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 3.5%. Based on the previous graph, the quantity of loanable funds supplied is than the quantity of loans ▼ of loanable funds. This would encourage lenders to the interest rates they charge, thereby demanded, resulting in a the quantity of loanable funds supplied and the quantity of loanable funds demanded, moving the market toward 0% the equilibrium interest rate of INTEREST RATE (Percent)

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would shift:   a. the demand for loanable funds left and shift the supply of dollars in the market for foreign-currency exchange right.   b. both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange right.   c. both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange left.   d. the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange left.

PLEASE ANSWER ALL QUESTIONS NOT JUST SOME PLEASE WRITE THE EXACT NUMBERS FOR THE GRAPH. PLEASE READ CAREFULLY, THIS MAY BE A SIMILAR QUESTION, BUT ALL QUESTIONS ARE DIFFERENT

a. Consider the Market for Loanable Funds in a closed economy. What would be the impacts of the following events on interest rates and investment. i. The government introduces a tax credit for savings accounts of up to $10,000 per year. ii. The government introduces a tax credit for savings accounts of up to $10,000 per year, and at the same time it repeals an investment tax exemption provision. iii. The government raises the tax rates. iv. The government issues bonds worth $10 billion. b. In a closed economy GDP = $1,400, private saving = $225, government budget deficit = $15, and government spending $25 (all numbers are in billions). Calculate national saving, taxes, and consumption. %3D

Show graphically and explain how an increase in household confidence about future income affects the loanable funds market