Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 24.2, Problem 5RQ
To determine
Explain the real interest rate as an
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What happens to the quantity of loanable funds supplied when the interest rate rises? Explain why this change happens?
Using the market for loanable fund diagram, show graphically how it affects interest rate and investment in each of the following cases.
a) G > T.
b) A book titled ‘Live for Tomorrow’ convinces people to spend less.
c) Tax on interest income rises.
please answer step by step.Answer must be correct.Show all calculation. please Don,t copy from anywhere.
What impact does the government have in the loanable funds market?
Forces that change the demand for investment in turn impact the demand for loanable funds. These forces include the change of government policies
Chapter 24 Solutions
Macroeconomics
Ch. 24.1 - Prob. 1RQCh. 24.1 - Prob. 2RQCh. 24.1 - Prob. 3RQCh. 24.1 - Prob. 4RQCh. 24.2 - Prob. 1RQCh. 24.2 - Prob. 2RQCh. 24.2 - Prob. 3RQCh. 24.2 - Prob. 4RQCh. 24.2 - Prob. 5RQCh. 24.3 - Prob. 1RQ
Ch. 24.3 - Prob. 2RQCh. 24.3 - Prob. 3RQCh. 24.3 - Prob. 4RQCh. 24.3 - Prob. 5RQCh. 24.3 - Prob. 6RQCh. 24.4 - Prob. 1RQCh. 24.4 - Prob. 2RQCh. 24.4 - Prob. 3RQCh. 24 - Prob. 1SPACh. 24 - Prob. 2SPACh. 24 - Prob. 3SPACh. 24 - Prob. 4SPACh. 24 - Prob. 5SPACh. 24 - Prob. 6SPACh. 24 - Prob. 7SPACh. 24 - Prob. 8SPACh. 24 - Prob. 9SPACh. 24 - Prob. 10SPACh. 24 - Prob. 11SPACh. 24 - Prob. 12SPACh. 24 - Prob. 13APACh. 24 - Prob. 14APACh. 24 - Prob. 15APACh. 24 - Prob. 16APACh. 24 - Prob. 17APACh. 24 - Prob. 18APACh. 24 - Prob. 19APACh. 24 - Prob. 20APACh. 24 - Prob. 21APACh. 24 - Prob. 22APACh. 24 - Prob. 23APACh. 24 - Prob. 24APACh. 24 - Prob. 25APACh. 24 - Prob. 26APACh. 24 - Prob. 27APACh. 24 - Prob. 28APACh. 24 - Prob. 29APACh. 24 - Prob. 30APA
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- If there is a rise in the real interest rate, how does the quantity of loanable funds demanded change?arrow_forwardQ)Consider the market for loanable funds. If economic conditions are expected to become better, then the demand for loanable funds will _____ and the supply of loanable funds will _____. decrease; not change decrease; decrease not change; increase increase; decreasearrow_forwardGraph Interest Rate Figure 2 Saving Incentives Increase the Supply of Loanable Funds A change in the tax laws to encourage Americans to save more would shift the supply of loanable funds to the right from S₁ to S₂. As a result, the equilibrium interest rate would fall, and the lower interest rate would stimulate investment. Here the equilibrium interest rate falls from 5 percent to 4 percent, and the equilibrium quantity of loanable funds saved and invested rises from $1,200 billion to $1, 600 billion. 5% 4% 2.... which reduces the equilibrium interest rate... See graph built step by step 0 $1,200 Supply, S₁ $1,600 3.... and raises the equilibrium quantity of loanable funds. 5₂ 1. Tax incentives for saving increase the supply of loanable funds... Demand Build graph yourself Loanable Funds (in billions of dollars)arrow_forward
- What factors make up the total demand for loanable funds? The total supply of loanable funds. Please list and define each of these demand and supply factors in the Loanable Funds Theory of Interest.arrow_forwardName and explain on the example of your interest one factor that caused the shift of the supply for loanable funds? Draw the curve that supports it.arrow_forwardExplain the loanable funds theory of interest rates.arrow_forward
- Suppose that the government changes the tax code to allow additional amounts of money to be placed in 401(k) retirement accounts, increasing the extent to which people can delay their tax obligations. Show the effect by shifting the appropriate curve in the market for loanable funds.arrow_forwardDraw a graph of the supply and demand of loanable funds. Then, show how the interest rate will be affected when the following scenarios occur: a. The government implements a program that reduces investment tax credits. b. The government budget deficit is reduced by 30%. (Hint: Does the government still need to borrow?) c. More foreigners are saving their money in U.S. banks.arrow_forwardWhat happens to the market for loanable funds when interest rates increase? Planned investments increase. Planned investments is not effected There is a decrease in demand for loanable funds. There is a decrease in quantity demanded for loanable funds.arrow_forward
- The demand for loanable funds comes from investment and the supply of loanable funds comes from saving. Select one: True Falsearrow_forwardProvide two examples of changes in the market for loanable funds that can result in a change in the level of interest rates. Explain how and why the interest rate changes based on the loanable fund theory.arrow_forwardThe European Union sold 225 billion euros of green bonds as part of its pandemic recovery fund. How would this bond's issuance affect the equilibrium in the market for loanable funds?arrow_forward
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