Homework Answers
The loanable fund market is the market for the demand for the loanable fund and the supply of loanable fund. It is the market where borrowers and lenders meet each other. The market is in equilibrium where the demand and supply of loanable funds intersect each other. If the government faces a budget deficit, then the demand for loanable funds rises, and the demand curve will shift to the right. The interest rate will rise and saving increases and investment decreases. It is given in the following graph,
Add Answer to:
Question 3 (6pts): Suppose the loanable funds market is in equilibrium, and then the government experiences...
Question 4 (6pts): Suppose the money market is in equilibrium, unexpectedly real GDP increases. What will...
Question 4 (6pts): Suppose the money market is in equilibrium, unexpectedly real GDP increases. What will happen to equilibrium in the money market? Describe either intuitively, feel free to use graphs to aid in your explanation. What should the Federal Reserve do to keep interest rates the same? How will it accomplish this? Specifically mention changes in the quantity of money and the interest rate.
Question 4 (6pts): Suppose the money market is in equilibrium, unexpectedly real GDP increases. What will...
Question 4 (6pts): Suppose the money market is in equilibrium, unexpectedly real GDP increases. What will happen to equilibrium in the money market? Describe either intuitively, feel free to use graphs to aid in your explanation. What should the Federal Reserve do to keep interest rates the same? How will it accomplish this? Specifically mention changes in the quantity of money and the interest rate.
Assume that the market for loanble funds is in equilibrium and that the federal government budget...
Assume that the market for loanble funds is in equilibrium and that the federal government budget is balanced. Now assume that the federal government begins to run a budget deficit (G > T). Does this shift the supply or demand for loanable funds? Why? What happens to the real interest rate? What happens to the quantity of loanable funds? What is the resulting impact on investment in the economy? What is this called?
6. Suppose there is a surplus in the market for loanable funds. Is the interest rate...
6. Suppose there is a surplus in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do saving and investment at this interest rate be compared? Which one is greater? 7. If at some interest rate desired investment is $400 billion, desired private saving is $600 billion, and the budget deficit is $300 billion, is there a surplus or a shortage in the market for loanable funds? What does this imply would happen...
Use the loanable funds model to analyze the effects of a government budget deficit: -Draw the...
Use the loanable funds model to analyze the effects of a government budget deficit: -Draw the diagram showing the initial equilibrium of the loanable fund market in the below perpendicular axis. 1 point -Determine which curve shifts when the government runs a budget deficit (explain), and draw the new curve on your diagram. I point -What happens to the equilibrium values of the interest rate and investment? Explain. 1 point -Determine the relationship between the crowding-out effect and investment, explain...
4. Assume that the equilibrium in the loanable funds market is at interest rate of 1.25%...
4. Assume that the equilibrium in the loanable funds market is at interest rate of 1.25% and quantity of funds at $20 billion. Suppose the current government deficit is zero so government is not borrowing any money. a) Suppose now government increases spending by $2 billion and finances it entirely by borrowing. This deficit increases equilibrium interest rate to 2% and equilibrium quantity of funds to $21.5. Show the changes on the graph. b) What happens to private investment (I)...
4. Assume that the equilibrium in the loanable funds market is at interest rate of 1.25%...
4. Assume that the equilibrium in the loanable funds market is at interest rate of 1.25% and quantity of funds at $20 billion. Suppose the current government deficit is zero so government is not borrowing any money. a) Suppose now government increases spending by $2 billion and finances it entirely by borrowing. This deficit increases equilibrium interest rate to 2% and equilibrium quantity of funds to $21.5. Show the changes on the graph. b) What happens to private investment (I)...
it is budget surplus, rather than deficit 4. Suppose the market for loanable funds is current...
it is budget surplus, rather than
deficit
4. Suppose the market for loanable funds is current in equilibrium, with zero capital inflows or capital outflows and zero government budget deficit. (a) Using a supply and demand diagram, depict this situation. 5 points. (b) Suppose the government begins to run a budget surplus; assuming all else equal, depict the effect this will have on the interest rates and total lending. 5 points. (c) What effect will this deficit have on the...
Q.1 (15 points) Assume that the equilibrium in the loanable funds market is at an interest...
Q.1 (15 points) Assume that the equilibrium in the loanable funds market is at an interest rate of 5% and the total quantity of loans is $650 billion. In addition, in this initial situation, the government is borrowing $80 billion per year to fund the budget deficit. (a) How much is the private investment in this initial equilibrium? (b) Now the government increases spending by $320 billion per year and finances this spending completely with additional borrowing. (i) Draw a...
1. Suppose the government restricts foreign lenders from lending money in the US loanable funds market....
1. Suppose the government restricts foreign lenders from lending money in the US loanable funds market. What happens to the equilibrium interest rate in the US? 2. Suppose credit card companies encourages households to spend more. What happens to the equilibrium quantity of loans in the loanable funds market?
Question 4 (6pts): Suppose the money market is in equilibrium, unexpectedly real GDP increases. What will happen to equilibrium in the money market? Describe either intuitively, feel free to use graphs to aid in your explanation. What should the Federal Reserve do to keep interest rates the same? How will it accomplish this? Specifically mention changes in the quantity of money and the interest rate.
Question 4 (6pts): Suppose the money market is in equilibrium, unexpectedly real GDP increases. What will happen to equilibrium in the money market? Describe either intuitively, feel free to use graphs to aid in your explanation. What should the Federal Reserve do to keep interest rates the same? How will it accomplish this? Specifically mention changes in the quantity of money and the interest rate.
Use the loanable funds model to analyze the effects of a government budget deficit: -Draw the diagram showing the initial equilibrium of the loanable fund market in the below perpendicular axis. 1 point -Determine which curve shifts when the government runs a budget deficit (explain), and draw the new curve on your diagram. I point -What happens to the equilibrium values of the interest rate and investment? Explain. 1 point -Determine the relationship between the crowding-out effect and investment, explain...
it is budget surplus, rather than
deficit
4. Suppose the market for loanable funds is current in equilibrium, with zero capital inflows or capital outflows and zero government budget deficit. (a) Using a supply and demand diagram, depict this situation. 5 points. (b) Suppose the government begins to run a budget surplus; assuming all else equal, depict the effect this will have on the interest rates and total lending. 5 points. (c) What effect will this deficit have on the...
Q.1 (15 points) Assume that the equilibrium in the loanable funds market is at an interest rate of 5% and the total quantity of loans is $650 billion. In addition, in this initial situation, the government is borrowing $80 billion per year to fund the budget deficit. (a) How much is the private investment in this initial equilibrium? (b) Now the government increases spending by $320 billion per year and finances this spending completely with additional borrowing. (i) Draw a...
Most questions answered within 3 hours.
-
Explain in detail
Germany is the fifth largest economy
explain what goods and services Germany specializes...
asked 8 minutes ago -
The density of platinum is 21.45 g/mL. If a cube of platinum
with a mass of...
asked 14 minutes ago -
Accounts Receivable
Sales
A/R Posting
Extended Sales Invoice
Packing Slip
Compare invoice to packing slip 2...
asked 17 minutes ago -
Michaella, age 23, is a full-time law student and is claimed by
her parents as a...
asked 17 minutes ago -
Why are polymers not typically casted into products?
asked 34 minutes ago -
When rolling a die 129 times, what is the probability of rolling
a 6 no more...
asked 51 minutes ago -
4. A call option currently sells for $7.75. It has a strike
price of $85 and...
asked 40 minutes ago -
1.
You need to prepare 10.0 liters of an acid aqueous solution with a
pH of...
asked 43 minutes ago -
Along an aggregate supply curve, if the level of output is less
than the natural level...
asked 43 minutes ago -
By 2025, annual consumption in emerging markets will total $30
trillion and contribute more than ________...
asked 48 minutes ago -
At what point does reformation cease to be a viable option for
those who are oppressed...
asked 52 minutes ago -
Place letters corresponding to amounts in the proper order for
lightest to heaviest samples:
a) 2100...
asked 57 minutes ago