Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 26, Problem 4CQQ
To determine
The effect of the save more for retirement on the loanable fund market.
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If a popular TV show on personal finance convincesAmericans to save more for retirement, the_________ curve for loanable funds would shift,driving the equilibrium interest rate _________.a. supply; upb. supply; downc. demand; upd. demand; down
Use the graph to answer the question that follows.
Real interest
rate %
r
Dif
q
q'
Quantity of
loanable funds $
The graph shows a change in an economy after the government's decision to provide tax benefits to businesses in an effort to increase investment. What is the new point of equilibrium in the economy's loanable funds market?
O o
Or
O o
O q
Or
o'
Sif
D'If
Suppose the government borrows $20 million more next year than this year. a. Draw and fully label a diagram to illustrate the market for loanable fund to analyze this policy.
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?
Chapter 26 Solutions
Principles of Economics (MindTap Course List)
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Similar questions
- There is recently an increase in private saving in Canada. Assume this occured by a drop in autonomous consumption. a. what happens to the supply of loanable funds? Shift right, shift left, no shift b. what happens to the demand for loanable funds? Shift right, shift left, no shift c. what happens to the real interest rate? up, down, stay the samearrow_forward1 a. Suppose there are two types of investment in the economy: business fixed investment and residential investment. Suppose that loanable fund market is in equilibrium and the government grants an investment tax credit only for business investment. How does this policy affect the supply and demand for loanable funds, the equilibrium interest rate and equilibrium quantity of loanable funds? Use graph to explain your answearrow_forwardd. A reduction in the cost of acquiring new physical capital creates many new profitable opportunities for firms. The Loanable Funds Market Interest rate This will: Quantity of dollars Interest rate This will: I Oraise the equilibrium interest rate and decrease the quantity of funds saved and invested. raise the equilibrium interest rate and increase the quantity of funds saved and invested. lower the equilibrium interest rate and decrease the quantity of funds saved and invested. lower the equilibrium interest rate and increase the quantity of funds saved and invested. e. The government decides to increase government purchases (G), which increases the size of the budget deficit. 0 The Loanable Funds Market Quantity of dollars S I O S Ø Oraise the equilibrium interest rate and increase the quantity of funds saved and invested. O raise the equilibrium interest rate and decrease the quantity of funds saved and invested. Olower the equilibrium interest rate and decrease the quantity of…arrow_forward
- Use the graph to answer the question that follows. Quantity of Loanable Funds (S) Assume that the loanable funds market is in equilibrium, as shown in the graph.If households become concerned about retirement income and spend less,what will happen in this market for loanable funds? O The demand for funds will increase, as will the equilibrium interest rate. O Both the demand for funds and the supply of funds will decrease, with an indeterminate impact on the equilibrium interest rate. ) The demand for funds will decrease, and the equilibrium quantity of funds transacted will erease below Fo. O Both the demand for funds and the supply of funds will icrease, with an increase in the quantity of funds transacted. O The supply of funds will increase, and the equilibrium interest rate wi fall blow ro. Real Interest Ratearrow_forwardWhat is the effect of a fall in the real interest rate on the demand for loanable funds? A fall in the real interest rate _______. A. decreases the demand for loanable funds and shifts the demand curve leftward B. decreases the quantity of loanable funds demanded up along the demand curve C. increases the demand for loanable funds and shifts the demand curve rightward D. increases the quantity of loanable funds demanded down along the demand curve Thanks!arrow_forwardRecently, the economies of North Korea and Norway have begun to grow very rapidly. This increases their citizens’ income and wealth as well. In turn, these citizens increase their savings not only in their country, but also in the United States. In this case, which of the following statements is correct? A. The supply of loanable funds decreases as savings increase. B. The supply of loanable funds increases as savings increase. C. The demand of loanable funds decreases as savings increase. D. Both supply and demand of loanable funds increase as savings increase.arrow_forward
- Recently, the economies of North Korea and Norway have begun to grow very rapidly. This increases their citizens’ income and wealth as well. In turn, these citizens increase their savings not only in their country, but also in the United States. In this case, which of the following statements is correct? A. The supply of loanable funds decreases as savings increase. B. The supply of loanable funds increases as savings increase. C. The demand of loanable funds decreases as savings increase. D. Both supply and demand of loanable funds increase as savings increase. Clear my choicearrow_forwardOver time how do changes in the demand for loanable funds and the supply of loanable funds change the real interest rate? Over time,_______. A. the demand for loanable funds trends downward, the supply of loanable funds trends upward, and the real interest rate trends upward. B. both the demand for loanable funds and the supply of loanable funds trend upward, and the real interest rate also trends upward. C. the demand for loanable funds trends upward, the supply of loanable funds trends downward, and the real interest rate trends upward. D. both the demand for loanable funds and the supply of loanable funds trend upward, but the real interest rate has no trend.arrow_forwardIn the graph you've just made, how does a tax on interest income influence the real interest rate and investment? A tax on interest income _______ loanable funds, which _______ the real interest rate and _______ investment. A. decreases the demand for; raises; decreases B. decreases the supply of; raises; decreases C. increases the supply of; lowers; increases D. increases the demand for; lowers; increases Screenshot attached thanksarrow_forward
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