Homework Answers
Answer : 6) When people save more then the supply in loanable fund market increase. As a result, in loanable fund market the supply curve shifts to rightward which decrease the real interest rate. When the real interest rate fall in domestic country then the demand and value of domestic currency decrease. As a result, the exchange rate fall. Here savings increases in U.S. as U.S. citizens saves more. Due to increase in savings in U.S. the supply of loanable funds increase and the equilibrium real interest rate decrease. As the interest rate decreases in U.S. hence the demand and value of U.S. currency falls which decrease the real exchange rate.
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6. Suppose that U.S. citizens start saving more. What does this imply about the supply of...
8. Suppose the government borrows $20 billion more next year than this year. a. Use a supply-and-demand diagram to...
8. Suppose the government borrows $20 billion more next year than this year. a. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? b. What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the $20 billion of extra government borrowing. c. How does the elasticity of supply of loanable funds affect the size of these changes? d. How does the elasticity of demand...
Y, and AD-AS),.. 81. In the long run, an increase in the supply of money does...
Y, and AD-AS),.. 81. In the long run, an increase in the supply of money does what? 82. Investment drives the business cycle because 83. The main caus e of cyclical recessions and depressions 84. The growth of GDP with no change in MV would do what to AS, AD, and p? 85. Suppose the U.S. Treasury finances a budget deficit by selling bonds the U.S. public. The money supply will 86. Is a central bank is needed by a...
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...
5. Macroland’s domestic supply of saving, domestic demand for saving for purposes of capital formation, and...
5. Macroland’s domestic supply of saving, domestic demand for saving for purposes of capital formation, and supply of net capital inflows are given by the following equations: S = 1500 + 2000r I = 2000 – 4000r KI = -100 + 6000r a) Assuming that the market for saving and investment is in equilibrium, find national saving, capital inflows, domestic investment, and the real interest rate. b) Repeat part (a), assuming that desired national saving declines by 120 at each...
which of the following statements about the loanable funds market is (are) correct? (x) When the...
which of the following statements about the loanable funds market is (are) correct? (x) When the supply of loanable funds shifts to the right then the equilibrium real interest rate decreases and the equilibrium quantity of loanable funds decreases. (y) When the demand for loanable funds shifts to the right then the equilibrium real interest rate increases and the equilibrium quantity of loanable funds increases. (z) If the demand for loanable funds shifts to the right and the supply of...
3. E ffects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domesti...
3. Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol)...
What influences the supply of loanable funds? The supply of loanable funds is influenced by O...
What influences the supply of loanable funds? The supply of loanable funds is influenced by O A. the real interest rate, and as the real interest rate rises, the supply of loanable funds increases O B. expected future income, and the higher a household's expected future income, the smaller is its saving today O c. expected profit OD. a household's wealth, and the greater a household's wealth, the greater is its saving
i need answers and explanations 35. With the low unemployment rate, households become more optimistic about...
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...
20. What does purchasing-power parity imply? a. that real incomes should be the same...
20. What does purchasing-power parity imply? a. that real incomes should be the same in all countries b. that the nominal exchange rates should be equal to 1 for all currencies c. that the price of a standard hamburger should be the same everywhere d. that the rent for an apartment should be the same everywhere 11. What is the most likely effect of an appreciation of the Canadian real exchange rate...
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...
8. Suppose the government borrows $20 billion more next year than this year. a. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? b. What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the $20 billion of extra government borrowing. c. How does the elasticity of supply of loanable funds affect the size of these changes? d. How does the elasticity of demand...
Y, and AD-AS),.. 81. In the long run, an increase in the supply of money does what? 82. Investment drives the business cycle because 83. The main caus e of cyclical recessions and depressions 84. The growth of GDP with no change in MV would do what to AS, AD, and p? 85. Suppose the U.S. Treasury finances a budget deficit by selling bonds the U.S. public. The money supply will 86. Is a central bank is needed by a...
What influences the supply of loanable funds? The supply of loanable funds is influenced by O A. the real interest rate, and as the real interest rate rises, the supply of loanable funds increases O B. expected future income, and the higher a household's expected future income, the smaller is its saving today O c. expected profit OD. a household's wealth, and the greater a household's wealth, the greater is its saving
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...
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...
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