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 answer.

Q: Other things the same, people in the U.S. would want to save more if the real interest rate in the…

A: Savings is a positive function of interest rate according to the Classical model while it is a…

Q: Shift the appropriate curves to indicate what will happen to the market if the government grants a…

A: The given figure indicates the market for loanable funds.

Q: A borrower cannot become a saver if the rate of interest decreases, but might become a saver if the…

A: To understand the above stated problem firstly we state the intertemporal budget constraint faced by…

Q: Suppose that the government changes the tax code to allow additional amounts of money to be placed…

A: Change in tax code leads to increase in supply of loanable fund in the market, thus the supply curve…

Q: The following graph shows the market for loanable funds. On the graph, show the effects of an…

A: In the classical macroeconomic theory, the loanable funds market determines the equilibrium interest…

Q: Suppose that the government is concerned with the unemployment rate and, as a response, offers a tax…

A: Tax refers to the compulsory payment that imposed by the government on consumer, individual people…

Q: 5. The market for loanable funds and government policy The following graph shows the market for…

A: Scenario 1: Decrease in tax rate on interest income, encourages people to save more. Savings is the…

Q: Chairman Latrobe, the Supreme Leader of Rolling Rock decided to        increase the personal tax…

A: Note: Since you have posted multiple independent questions in the same request, we will solve the…

Q: Classify each of the given events according to the category that best describes how it affects the…

A: Increase the interest rate: An increase in the large investments: the new equilibrium point will be…

Q: Draw a correctly labeled graph of the loanable funds market showing the equilibrium real interest…

A: Loanable funds are the total amount of money that individuals and businesses in a given economy have…

Q: The sudden outbreak of the pandemic has negatively affected consumer confidence and caused…

A: The market for loanable assets portrays how that getting occurs. The inventory of loanable assets…

Q: 5. The market for loanable funds and government policy The following graph shows the market for…

A: Savings is the source of supply of loanable funds and investment is the source of demand for…

Q: Using a graph for the loanable funds market of this economy, show what are the effect on the…

A: The market for loanable funds describes how borrowing happens in the market. The supply of loanable…

Q: The following graph shows the market for loanable funds in a closed economy. The upward-sloping…

A: Lenders are the source of the supply of loanable funds. These can be consumers or institutions that…

Q: The following graph shows the market for loanable funds in a closed economy. The upward-sloping…

A: We have given a graph of the market for loanable funds.

Q: Consider a loanable funds market of Pakistan. Suppose, if government want to implement the policy to…

A: The nations around the world tries to enhance their development by increasing the investment…

Q: Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks.…

A: ANSWER   (1) (a) Lower tax on interest income will increase savings, increasing the supply of…

Q: The French Government runs a budget surplus to finance its expenditure. Use the loanable funds model…

A: Here, it is given that the French government has budget surplus, which implies that it collects more…

Q: Briefly explain the accelerator model of investment

A: In macroeconomics, the production and allocation decisions regarding an entire country or economy…

Q: Suppose, the government of Australia incurs a budget deficit of $50 billion due to increased…

A: A budget deficit tends to occur when the expenses tend to exceed revenue and it indicates the…

Q: If there is a rise in the real interest rate, how does the quantity of loanable funds demanded…

A: In the loanable funds market, loanable funds are demanded by the firms or businesses because it is…

Q: Complete the following statements. a. Dan saves a portion of his income in an interest-earning…

A: Hey, Thank you for the question. According to our policy we can only answer 3 subparts per question.…

Q: Briefly explain the yearly rate-of-return method that policyowners can use to determine the rate of…

A: A profit from an investment is referred to as a return. It includes any change in the investment's…

Q: Which of the following could explain an increase in the equilibrium interest rate and a decrease in…

A: Market for loanable funds shows demand and supply for loanable funds and equilibrium in the market…

Q: Consider a loanable funds market of Pakistan. Suppose, if government want to implement the policy to…

A: In classical theory, the equilibrium interest rate in the economy is determined by the loanable…

Q: Supply and demand for loanable funds The following graph shows the market for loanable funds in a…

A: Loanable funds market is an imaginary market which illustrates the market result of the demand for…

Q: Draw the diagram for the loanable funds model. Suppose the tax laws are altered to provide more…

A: Loanable funds include all types of credits that are available in the market to firms and households…

Q: The following graph shows the market for loanable funds in a closed economy. The upward-sloping…

A: Equilibrium is attained in the loanable funds market where the supply of loanable funds represented…

Q: The following graph shows the loanable funds market in equilibrium at an interest rate of 3%. On the…

A: The increase in government expenditure is an indication of the fact that the aggregate expenditure…

Q: Using a supply and demand diagram, explain  the following scenario impacts the market for loanable…

A: The economic agents (households, businesses and governments) always use resources of credit system…

Q: Use the graph to answer the question that follows. Real interest rate % Dif q q' Quantity of…

A: Loanable funds refers to the amount of money that people are willing to give as loans rather than…

Q: Consider a loanable funds market of Pakistan. Suppose, if government want to implement the policy to…

A: Demand for loanable funds shows a inverse relationship between the interest rate and quantity of…

Q: balanced budget.

A: The Budget deficit implies when its expenditures exceeds its revenue. The Budget deficit has several…

Q: Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks.…

A: Investment is the source of demand for loanable funds and savings is the source of supply of…

Q: The graph below represents the market for loanable funds for an economy, Use the graph to answer the…

A: Equilibrium refers to the quantity where Demand and supply intersect each other.

Q: Briefly explain the role played by banks between savers and borrowers and the economic benefit, if…

A: Banks provide savings to depositors by providing them with saving rate and borrowers borrow money at…

Q: Show how an increase in the supply of loanable funds and a decrease in the demand for loanable funds…

A: The following curves are drawn below:

Q: The following graph shows the market for loanable funds in a closed economy. The upward-sloping…

A: The market for Loanable Funds defines how the borrowing and lending activities take place in the…

Q: Refer to the figure above. Assume that the loanable funds market initially is in equilibrium at…

A: New equilibrium is at point A where new demand curve(D2) and new supply curve(SA) intersect.

Q: 3. Supply and demand for loanable funds The following graph shows the market for loanable funds in a…

A: Loanable fund theory: - Loanable fund theory is the theory that determines the interest rate,…

Q: The loanable funds market in Country Z is in equilibrium. (a) Draw a correctly labeled graph of the…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Consider the market for loanable fund. Suppose that government started to give tax incentives for…

A: Answer: If the government started to give tax incentives for investment then the cost of investment…

Q: Assess the following statements: 1. At interest rate above the equilibrium, there is a surplus of…

A: Equilibrium in loanable funds market is at such an interest rate when quantity of loanable funds…

Q: Draw a graph to illustrate the effect of an increase in the demand for loanable funds and an even…

A: The effect of increasing demand for and a large increase in supply of loanable fund on equilibrium…

Q: a high interest rate can also indicate that something positive is happening in the economy. Describe…

A: A high interest rate can also indicate that something positive is happening in the economy.