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.
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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.
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- Draw a graph depicting interest rates at the quantity of loanable funds. Answer the following questions regarding this graph. Explain why the supply of loanable funds is upward sloping. Explain why the demand of loanable funds is downward sloping. If the Federal Reserve sells government bonds, show what will happen to this graph. Explain the effects on interest rates and the quantity of loanable funds. If the Federal Reserve lowers the required reserve rate, show what will happen to this graph. Explain the effects on interest rates and the quantity of loanable funds.The graph shows the private demand for loanable funds curve and the supply of loanable funds curve. Draw a curve that shows the effect on the loanable funds market when the government has a budget deficit. Label it C₁. Draw a curve that shows the Ricardo-Barro effect on the loanable funds market. Label it C₂. Draw a point at the new real interest rate and quantity of loanable funds. The Ricardo-Barro effect crowding out. Click the graph, choose a tool in the palette and follow the instructions to create your graph. 10 8- 6- 4- 2- Real interest rate (percent per year) SLF PDLF Loanable funds (trillions of 2009 dollars) >>> Draw only the objects specified in the question.Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if a) a reduction in military spending moves the government's budget from deficit into surplus. b) the government raises its tax on corporate profits. Other tax changes also are made, such that the government's deficit remains unchanged. c) a rise in life span of Americans.
- 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. NOTE: the first dropdown question options are (fall or rise), the seconds are (decrease or increase), the thirds are (fall or rise), the fourths are (fall or rise), the fifths are (deficit or surplus), the sixths are (decreases or increases), the sevenths are (fall or rise), and the last ones is (crowding out ot increasing)a high interest rate can also indicate that something positive is happening in the economy. Describe how positive factors can lead to an increased in the demand for loanable funds and then an increase in the interest rate.The following graph shows the demand for loanable funds and the supply of loanable funds in the United States. At the current equilibrium, the government is experiencing a balanced budget. Assume that the U.S. government bails out several troubled banks without increasing taxes, creating a budget deficit. Show the effect of the budget deficit on the market for loanable funds by shifting the demand (D) curve, the supply (S) curve, or both. D S INTEREST RATE F2 -O- F3 Ö+ F4 C D F5 a F6 N F7 51- F8 5+ F9 Ⓒ F10 -0. F11 F12 Fn Lock Ins P
- Suppose the government borrows $20 million more next year than this year. How does the elasticity of the supply of loanable funds affect the size of these changes? How does the elasticity of the demand of loanable funds affect the size of these changes?According to how we model the Loanable Funds market in Ch. 6 (considering household savings and taking (T – G) as government’s net ‘saving,’ which could be negative it there were a budget deficit), which of the following shifts the Supply of Loanable Funds curve to the left? (T = taxes; G = government spending.) Group of answer choices A) higher tax rates on business investment spending B) a change in tastes toward consuming less C) higher budget deficit D) change in tastes toward saving more E) lower budget deficitThe French Government runs a budget surplus to finance its expenditure. Use the loanable funds model to show what happens to the interest rate, investments, and the quantity of loanable funds.
- The following graph shows the loanable funds market in the United States. It plots both the demand (D) for loanable funds and the supply (S) of loanable funds. At the current equilibrium, the government is operating with a balanced budget. Assume now that the financial industry is close to bankruptcy and the U.S. government decides to implement a bailout plan of several billion dollars without increasing taxes, causing a budget deficit. Show the effect of the budget deficit on the market for loanable funds by shifting the demand (D) curve, the supply (S) curve, or both. Based on this model, the budget deficit leads to (an increase/a decrease) in the level of investment and (an increase/a decrease) 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. -A…c. If the Federal Reserve sells government bonds, show what will happen to this graph. Explain the effects on interest rates and the quantity of loanable fundsThe 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.) 14 INTEREST RATE (Percent) Demand Supply LOANABLE FUNDS (Billions of dollars) Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 18%. Now suppose there is a decrease in the tax rate on interest income, from 18% to 14%. Shift the appropriate curve on the graph to reflect this change. Demand 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…