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- How distortions affect the market of tradable and non-tradable goods and how it affects the financial and economic values of these goods?A number of articles published in the Wall Street Journal in the pastyear convince Americans to save more in financial markets andintermediaries to prepare for retirement. The ______ curve in theloanable funds market shifts ______, driving the equilibrium interestrate ______.a. Demand, right, upb. Demand, left, downc. Supply, right, downd. Supply, left, upSuppose Indian government borrows 50,000/- more next year than this year. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the 50,000/- of extra government borrowing.
- True or false? Why?"A temporary tax rise never has a significant effect on current consumption."Figure 21-2 Apol Interest THE L 00 Supply D Demand D. Loanable funds [bons of dollars per year. Refer to Figure 21-2. Which of the following is consistent with the graph depicted above? New government regulations decrease the profitability of new investment. Consumption taxes increase. The government runs a budget surplus. An expected expansion increases the profitability of new investment.Explain, why is reducing the interest rate not necessarily enough to stimulate investment spending?
- What is the present status of consumer confidence as measured by the Conference Board’s index? How will this affect Aggregate Spending?Adjust the graph to show how a $25.8 billion dollar increase in the government's budget deficit affects the hypothetical loanable funds market below, holding all else equal. Market for Loanable Funds Select the answer that describes the adjustment in the loanable funds market. O The deficit decreases the demand for loanable funds and shifts the demand curve to the left; decreasing the interest rate and crowding out investment spending. O The deficit decreases national savings and shifts the supply curve to the left; increasing the interest rate and crowding out investment spending. O The deficit increases the demand for loanable funds and shifts the demand curve to the right; increasing the interest rate and crowding out investment spending. O The deficit increases national savings and shifts the supply curve to the right; decreasing the interest rate and crowding out investment spending. D Quantity of loanable funds (billions of $) Interest rate"Crowding our causes a net decrease in private sector investment becaune O Foreign bond markets siphon loanable funds out of a nation's domestc quantty of loanabie funds A national govemment has collected more revenues in taes than has spent, and therefore loane the surglus un peors OBanks and other intermediaries have coluded to arficaly create interest ates thut are much highe than the equbriumterest rte A national govermment has spent far more tax money than ha received and needs to ie bonds to pvate citens in order to balance ts budget
- Explain how and why this situation affects the investment demand curve Firms plan to increase current inventory levels.Everything else held constant, when financial frictions increase, the real cost of borrowing at any given inflation rate.a. increases; risesb.increases; fallsc.decreases; risesd.decreases; falls so that planned investment spendingAre the inventories typically the least liquid of a firm 's current assets? How?
