Which of the following would result in an increase in the equilibrium real interest rate and a decrease in the quantity of loanable funds in the loanable funds framework? Group of answer choices The tax code is reformed to encourage greater investment. The tax code is reformed to encourage greater saving. The government starts running a budget deficit. The tax code is changed in a way that discourages investment.

Which of the following would result in an increase in the equilibrium real interest rate and a decrease in the quantity of loanable funds in the loanable funds framework? Group of answer choices The tax code is reformed to encourage greater investment. The tax code is reformed to encourage greater saving. The government starts running a budget deficit. The tax code is changed in a way that discourages investment.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter16: Interest, Rent, And Profit

Section: Chapter Questions

Problem 3QP

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The French Government runs a budget surplus to finance its expenditure. Use the loanable funds model to show what happens to the interest rate, investments, and the quantity of loanable funds.
3.3 Explain and show graphically how an increase in household saving affects the equilibrium interest rate and the equilibrium quantity of loanable funds. 3.4 Explain and show graphically how an increase in expected profits from firm investment projects affects the equilibrium interest rate and the equilibrium quantity of loanable funds. 3.5 Explain and show graphically how an increase in government spending (i.e. budget deficit) affects the equilibrium interest rate in the market for loanable funds.
Figure 26-5. Figure 26-5 shows the loanable funds market for a closed economy. Interest Rate 7% 6% 5% D S $75 $100 $125 Loanable Funds Refer to Figure 26-5. Starting at point A, a reduction in government spending would cause a) the quantity of loanable funds traded to increase to $125 and the interest rate to fall to 5% (point D). b) the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to 7% (point E). c) the quantity of loanable funds traded to increase to $125 and the interest rate to rise to 7% (point C).
Macroeconomics referred to picture of Graph to answer questions fill in the blanks The Market for Loanable Funds II. Other things being equal, a decrease in taxes on savings and investment income will shift____ to the ____and_____interest rate. a. supply; right; decrease b. demand; right; increase (incorrect answer) c. demand; left; decrease d. supply; left; increase
Which of the following reasons could cause the demand curve for loanable funds to shift to the right from DLF to D¹LF in the figure? Wage $11 8 X 3400 2700 D 4500 Quantity of labor The economy is expected to boom, thereby increasing investment returns. O Larger investment projects with potentially higher returns get funded. Falling interest rates make it less expensive for firms to borrow. Rising interest rates make it more attractive for savers to save.
Using the loanable fund model (financial market) presented in chapter 3, suggest using a graph at least two policies that a government could use to increase the equilibrium quantity of investment in the economy, and carefully explain how these policies produce this result.
In the standard loanable funds market graph, … …an increase in the supply of loanable funds (rightward shift)... Group of answer choices A) none of the other options. B) could be caused by a tax increase for individuals on interest earned from savings accounts. C) would cause an increase in the real interest rate. D) could be caused by a tax break for businesses on investment spending. E) would cause a decrease in the real interest rate.
Investment — End of Chapter Problem Move the appropriate curve or curves in each graph to illustrate the effect of each of the four events on the market for loanable funds. If the event should not impact the market for loanable funds, then leave the graph unchanged.
Economists who favour balanced budgets argue that increases in government spending, without any corresponding increase in taxes, will have a certain effect in the market for loanable funds. Modify the graph to show this effect. Real interest rate demand X Quantity of loanable funds As a result, this impact on the market for loanable funds reduces imports. labour productivity. capital inflows. domestic investment.
In the era of Pandemic, Indonesia’s government is trying to ensure that all of it’s people could live and survive through pandemic. Some of the government’s policies are affecting the market for loanable funds. Using curve, illustrate the change in the market for loanable funds if the government decided to: a) Borrow $20 billion from The World Bank b) Suppose households believe that the greater government borrowing today implies higher taxes to pay off the government debt in the future c) Pass laws that make it easier for UMKM to borrow money
Use the loanable funds market to illustrate the effect of the following events on the equilibrium. Illustrate the effects on the interest rate and quantity of investment-savings a) The proportion of retired people in the population goes up. Think that usually retired people generally save less than working people at any interest rate. b) At any given interest rate, consumers decide to save more (assume the budget balance is zero). c) At any given interest rate, businesses become very optimistic about the future profitability of investment spending (assume the budget balance is zero).
If the demand for loans is held constant, what is the immediate effect of an increase in the supply of loanable funds? A)Equilibrium interest rates decrease B)The equilibrium quantity of loanable funds decreases C)Total investment decreases