6. Suppose the government creates a savings dis-incentive, such as a tax on savings. a. Show...
6. Suppose the government creates a savings dis-incentive, such as a tax on savings.
a. Show how the market for loanable funds is affected in a (well-labeled) graph
b. Explain how the equilibrium “price” and quantity have changed in this market
Homework Answers
A savings disincentive decreases savings and thereby reducing the supply of loanable funds. The effect of the shift of supply of loanable funds is shown in the below image.
Add Answer to:
6. Suppose the government creates a savings dis-incentive, such
as a tax on savings.
a. Show...
Suppose the government creates a savings dis-incentive, such as a tax on savings. a. Show how...
Suppose the government creates a savings dis-incentive, such as a tax on savings. a. Show how the market for loanable funds is affected in a (well-labeled) graph (6 points). b. Explain how the equilibrium “price” and quantity have changed in this market (4 points).
Suppose the government creates an investment incentive, such as a tax credit for undertaking capital improvements....
Suppose the government creates an investment incentive, such as a tax credit for undertaking capital improvements. a. Show how the market for loanable funds is affected in a (well-labeled) graph (6 points). b. Explain how the equilibrium “price” and quantity have changed in this market (2 points).
7. Suppose the government creates an investment incentive, such as a tax credit for undertaking capital...
7. Suppose the government creates an investment incentive, such as a tax credit for undertaking capital improvements. a. Show how the market for loanable funds is affected in a (well-labeled) graph b. Explain how the equilibrium “price” and quantity have changed in this market
Assume the government introduces a tax on your savings accounts (this includes all online savings accounts)....
Assume the government introduces a tax on your savings accounts (this includes all online savings accounts). Explain this effect has on the market for loanable funds using a diagram. What happens to equilibrium quantity of loanable funds and equilibrium real interest rates?
HDTV Price $1 2000 a. Suppose the government imposes a $300 per unit tax. Find the...
HDTV Price $1 2000 a. Suppose the government imposes a $300 per unit tax. Find the tax wedge on the graph. What is the equilibrium quantity and price under this tax policy? 1800 1600 1400 1200 1000 800 600 b. What is CS, PS, and TS in this market under the $300 per unit tax? 400 2003 0 2 3 4 5 6 7 8 9 10 HDTV Quantity (in 1,000s) c. How much efficiency is loss as the result...
Savings/Investment in Class GDP = 10 Consumption = 7 Government Spending = 2 Private Savings = 1 Transfer Payments...
Savings/Investment in Class GDP = 10 Consumption = 7 Government Spending = 2 Private Savings = 1 Transfer Payments = 1 A) Calculate Taxes, Investment, Public Savings and National Savings B) Draw the graph of the market for loanable funds, assuming the equilibrium interest rate i* = 3% Make sure to label the axis and equilibrium points C) If G increases so that now G = 2.5, recalculate Public Savings, National Savings and Investment. (assume that any other variables stay...
MPC Spending Multiplier Change in income 100 20 0.99 0.95 0.6 0.5 Change in government spending...
MPC Spending Multiplier Change in income 100 20 0.99 0.95 0.6 0.5 Change in government spending $15 $100 -$400 $450 $1,500 $2,000 -$1,000 $900 2.5 2.0 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...
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)...
1a) Assame that businesses are granted,4 fax credit on spending for machinery Using a correctly labeled...
1a) Assame that businesses are granted,4 fax credit on spending for machinery Using a correctly labeled graph of the loanable funds market,show the effect of the business sector's response on the real interest rate(07) b) Now assume instead the tax rate on interest income from housebold savings is lowered and there is no change in government budget deficit. Using a second correctly labeled graph of the loanable funds market show the effect of the houschold's response on the real interest...
HDTV Price $1 2000 a. Suppose the government imposes a $300 per unit tax. Find the tax wedge on the graph. What is the equilibrium quantity and price under this tax policy? 1800 1600 1400 1200 1000 800 600 b. What is CS, PS, and TS in this market under the $300 per unit tax? 400 2003 0 2 3 4 5 6 7 8 9 10 HDTV Quantity (in 1,000s) c. How much efficiency is loss as the result...
Savings/Investment in Class GDP = 10 Consumption = 7 Government Spending = 2 Private Savings = 1 Transfer Payments = 1 A) Calculate Taxes, Investment, Public Savings and National Savings B) Draw the graph of the market for loanable funds, assuming the equilibrium interest rate i* = 3% Make sure to label the axis and equilibrium points C) If G increases so that now G = 2.5, recalculate Public Savings, National Savings and Investment. (assume that any other variables stay...
MPC Spending Multiplier Change in income 100 20 0.99 0.95 0.6 0.5 Change in government spending $15 $100 -$400 $450 $1,500 $2,000 -$1,000 $900 2.5 2.0 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...
1a) Assame that businesses are granted,4 fax credit on spending for machinery Using a correctly labeled graph of the loanable funds market,show the effect of the business sector's response on the real interest rate(07) b) Now assume instead the tax rate on interest income from housebold savings is lowered and there is no change in government budget deficit. Using a second correctly labeled graph of the loanable funds market show the effect of the houschold's response on the real interest...
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