3. Supply and demand for loanable fundsThe following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanablefunds, and the downward-sloping blue line represents the demand for loanable funds.SupplyDemand100200300400500LOANABLE FUNDS (Billions of dollars)AINTEREST RATE (Percent)m00600 INTEREST RATE (FADemand00100200300400500600LOANABLE FUNDS (Billions of dollars)is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demandedSuppose the interest rate is 3.5%. Based on the previous graph, the quantity of loanable funds supplied isdemanded, resulting in aof loanable funds. This would encourage lenders tothe quantity of loanable funds supplied andthe equilibrium interest rate of%than the quantity of loansthe interest rates they charge, therebythe quantity of loanable funds demanded, moving the market toward

Demand for loanable funds shows the negative relationship between interest rate and quantity of…

3. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loa funds, and the downward-sloping blue line represents the demand for loanable funds. Supply Demand 100 200 300 400 500 LOANABLE FUNDS (Billions of dollars) A INTEREST RATE (Percent) 0 0 600

3. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loa funds, and the downward-sloping blue line represents the demand for loanable funds. Supply Demand 100 200 300 400 500 LOANABLE FUNDS (Billions of dollars) A INTEREST RATE (Percent) 0 0 600

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 6P

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Similar questions

Explain why is it difficult to set aside funds for investment when you are in poverty.
U3e the tollowing graph to show the effects on the Market for Loanable Funds of businesses discovering they have more than enough capital to meet the demand for their goods: Instructions: Drag the demand curve to illustrate the appropriate change in demand. Market for Loanable Funds Interest Rate 100 Supply (Savings) 90 80 70 60 50 Demand (Investment) 40 30 20 10 10 20 30 40 50 60 70 80 90 100 Dollar volume of Savings, Investment
Suppose the government borrows $20 million more next year than this year. Answer questions d and ea. Draw and fully label a diagram to illustrate the market for loanable fund to analyzethis policy.b. Does the rate of interest rise or fall? c. What happens to investment? To private savings? To public savings? To nationalsavings? d. How does the elasticity of the supply of loanable funds affect the size of thesechanges? e. How does the elasticity of the demand of loanable funds affect the size of thesechanges?
Use the analysis for the market for loanable funds diagram to illustrate and explain how the following government policy affects the economy’s saving and investment. Policy 1: Suppose the government starts with a balanced budget and then, because of a tax cut or spending increase, starts running a budget deficit.State, explain and draw the loanable funds diagram for i,ii and iii. (i) which which loanable funds curve would this policy affect?(ii) which way would the loanable funds curve shift?(iii) what would be the the impact on interest rates?
An economy's saving rate increased from -0.1 percent in 2015 to 2.0 percent in 2016 to 2.4 percent in 2017, to 2.9 percent in 2018, and to 3.0 percent in 2019. Explain why the saving rate might have increased and its effect on the supply of loanable funds. The saving rate might have increased because The increase in the saving rate will the supply of loanable funds. A. financial market turmoil could decrease wealth and expected future income; increase B. the demand for loanable funds could have decreased; decrease C. financial market turmoil always increases wealth and expected future income; increase D. financial market turmoil could decrease wealth and expected future income; decrease O E. the demand for loanable funds could have decreased; increase Click to select your answer. javascript:doExercise(13); esc 吕0 888 F1 F2 F3 F4 F5 F6 F7 F8 F9 F10 ! @ # 2$ & 1 2 3 4 5 7 8 Q W E Y tab T
Use the analysis for the market for loanable funds diagram to illustrate and explain how thefollowing government policy affect the economy’s saving and investment. Policy 1: Suppose thegovernment changes the tax code, allowing individuals to reduce their taxable income if they savemoney in registered retirement savings plans (RRSPs). Your response should answer the following questions:a. State and explain which loanable funds curve would this policy affect? b. Which way would the loanable funds curve shift? c. What would be the impact on interest rates? Draw the loanable funds diagram to illustrate your answers for a to c.
Table below shows total demand and supply of loanable funds (in RM billions) in an imaginary economy. Quantity demanded Interest rate of loanable funds Quantity supplied of loanable funds (percent) 85 4 72 80 6 73 75 8 75 70 10 77 65 12 79 60 14 81 A. Graph the market for loanable fund of this economy based on the data above and indicate the equilibrium quantity of loanable funds. B. Calculate the surplus or shortage at each level of interest rate. C. suppose the demand for loanable funds increases by RM 7 billion at each level of interest rate, indicate the effect of this changes on the equilibrium interest rate and quantity of loanable funds on your graph. |
QUESTION 7 Use the following diagram to answer this question The accompanying graph shows the market for loanable funds in equilibrium. Interest rate (%) 12 10 8 6 4 2 0 S E X 2 D 3 4 6 5 Quantity of loanable funds (trillions of dollars) Which of the following might produce a new equilibrium interest rate of 2% and a new equilibrium quantity of loanable funds of $1 trillion? OA. Consumers have increased consumption as a fraction of disposable income. OB. Businesses have become more pessimistic about the future and, as result; they plan to cut back on their spending. OC. The federal government has a budget surplus rather than a budget deficit. OD. The federal government has a budget deficit rather than a budget surplus. uhmit. Click Save All Answers to save all answers.
What 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!
QUESTION 9 Use the following diagram to answer this question The accompanying graph shows the market for loanable funds in equilibrium. Interest rate (%) 12 10 8 6 4 0 XH 2 3 E 4 6 5 Quantity of loanable funds (trillions of dollars) S Which of the following might produce a new equilibrium interest rate of 2% and a new equilibrium quantity of loanable funds of $5 trillion? OA. Firms become pessimistic about the future and, as a result, they cut back on their plans to buy new equipment and build new factories. ⒸB. Congress decreases the tax rate on interest income. C. Capital inflows from foreign citizens are declining. D. The U.S. government offers a tax credit for firms that built new factories in the U.S.
Use the analysis for the market for loanable funds diagram to illustrate and explain how thefollowing government policy affect the economy’s saving and investment. Policy 1: Suppose the government changes the tax code, allowing individuals to reduce their taxable income if they save money in registered retirement savings plans (RRSPs). Your response should answer the following questions: a. State and explain which loanable funds curve would this policy affect? b. Which way would the loanable funds curve shift? c. What would be the impact on interest rates? Draw the loanable funds diagram to illustrate your answers for a to c.
1 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 answe