Question

The loanable funds market and the benefits to investment it typically becomes obvious that we need...

The loanable funds market and the benefits to investment it typically becomes obvious that we need to encourage more investment. According to our loanable funds market we have two options for doing this, increase the supply of savings or increase the demand for investments. The government can play a role in both of these policies, but we always have to ask whether the government should. Can you think of a new and original program that would encourage more savings or a program that would encourage more investment.  

0 0
Add a comment Improve this question Transcribed image text
Answer #1

In the loanable fund markets in order to increase the level of investment and savings in the economy, government intervention is needed. However, if the private sector also starts taking serious actions in the direction of increasing the level of investment and savings in the economy, then government intervention in the economy can be reduced. If the private sector also starts providing concessions on increasing the level of investment in the economy and provide incentive to the employers who are saving more then this will increase the level of investment and savings in the economy also reduce the level of government intervention in the economy.

Add a comment
Know the answer?
Add Answer to:
The loanable funds market and the benefits to investment it typically becomes obvious that we need...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • How does the loanable funds market translate savings into investment and what adjusts to bring the...

    How does the loanable funds market translate savings into investment and what adjusts to bring the market to equilibrium? A. The savings provide the supply of loanable funds, while investment is the demand for loanable funds. While financial markets provide a means of transferring savings into investment, it is the inflation rate that changes to bring the market into equilibrium. B. The investments provide the supply of loanable funds, while saving is the demand for loanable funds. While financial markets...

  • 10. The sources of supply and demand for loanable funds Consider the market for loanable funds...

    10. The sources of supply and demand for loanable funds Consider the market for loanable funds in the United States. Which of the following are sources of the supply of loanable funds? Check all that apply. A- A household’s current after-tax income exceeds its utility-maximizing level of consumption. B- Government tax revenues exceed government spending. C- A firm’s profit-maximizing level of expenditures exceeds its profits in the current period. D- A government runs a budget deficit. E- A household’s utility-maximizing...

  • In a closed economy’s market for loanable funds, an increase in national savings caused by people’s...

    In a closed economy’s market for loanable funds, an increase in national savings caused by people’s decisions to save more will (increase, reduce, leave unchanged) the supply of loanable funds. It will also result in a (higher, lower, unchanged) real interest rate and (more, less, the same amount of) investment spending. (3 points; 1 point each)

  • Macroeconomics (consumption, investment and loanable funds) question. The Current U.S. government spending is $4.746 trillion. That's...

    Macroeconomics (consumption, investment and loanable funds) question. The Current U.S. government spending is $4.746 trillion. That's the federal budget for fiscal year 2020 covering October 1, 2019, to September 30, 2020. It's 21% of gross domestic product. That means that Government Spending in the United States has increased under the current U.S. Administration. Additionally, last year the Congress passed a tax reform that, among other effects, cut payroll taxes: i) Can you establish the macroeconomics effects of these policies on...

  • The market for loanable funds and government policy

    The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. (Note: You will not be graded on any changes you make to the graph.)DemandSupplyINTEREST RATE (Percent)LOANABLE FUNDS (Billions of dollars)Demand   Supply   Registered retirement savings plans (RRSPs) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Now suppose there is...

  • The supply of loanable funds (the source of funds) consists of Question 1 options: a) Total domestic saving a...

    The supply of loanable funds (the source of funds) consists of Question 1 options: a) Total domestic saving and net foreign saving. b) Investment and net exports. c) Total domestic saving and investment. d) Only total domestic saving. Question 2 (1 point) Saved Assuming all else held constant, an increase in net exports will lead to Question 2 options: a) an increase in net foreign saving. b) a decrease in the source of funds. c) a decrease in the trade...

  • International economics Loanable funds markets 1. International BoP example. The diagram is for the loanable funds...

    International economics Loanable funds markets 1. International BoP example. The diagram is for the loanable funds market in U.S. Assume that the world loanable funds rate is 3%. Assume the government budget is balanced. Real Int. Rate SLF domestic sources SLF from world DLF 70 90 100 Q of Loanable Funds In billions a. If the U.S. enacts a law that allows no international transactions, what would be: Real interest rate: Quantity of private savings: Quantity of funds desired for...

  • 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)...

  • 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...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT