Question

i need answers and explanations

35. With the low unemployment rate, households become more optimistic about the future economy and decide to increase their spending on durable goods such as automobiles. According to the model of the market for loanable funds, A) real interest rate and the quantity of loanable funds will remain unchanged. B) real interest rate will increase and the quantity of loanable funds will decrease. C) real interest rate will decrease and the quantity of loanable funds will increase. D) real interest rate and the quantity of loanable funds will both decrease. E) real interest rate and the quantity of loanable funds will both decrease. 36. With the low unemployment rate, households become more optimistic about the future economy and decide to increase their spending on durable goods such as automobiles. According to the model of the market for loanable funds, A) public saving and investment will both remain unchanged. B) public saving will remain unchanged and investment will decrease C) public saving will decrease and investment will remain unchanged. D) public saving will remain unchanged and investment will increase. E) public saving will increase and investment will remain unchanged.

Answer 1

35) The supply curve of loanable funds is saving curve of the economy.

If CONSUMER start spending more on durable goods then there consumption expenditure Increases and saving Decreases and supply of loanable funds decrease and supply of loanable funds shifts upwards .

At new equilibrium the real interst rate is higher and quantity of loanable funds is lower.

Conclusion; real interst rate will increase and quantity of loanable funds Decrease

Option B is Right.

36) public saving is equal to taxes minus government expenditure.because due to this CONSUMER activity,taxes and government spending is unaffected so public saving remain unchanged.

Durable goods are capital goods so buying those goods are investment,so investment will increase.

Option D is right