Explain how each of the following events affect the supply of loanable funds curve (shift or...
Explain how each of the following events affect the supply of loanable funds curve (shift or move):
a) [1 point] The economy is in a recession so people's disposable income is lower.
b) [1 point] The stock market is booming so the people's wealth is higher.
c) [1 point] Fewer college graduates are finding jobs so expected future income is lower.
d) [1 point] The real interest rate increases.
Homework Answers
a) As economy is in recession so spending falls and also income . This causes fall in savings rate . Supply of loanable funds decrease , shifts left .
b) As people have higher wealth people save more , supply of loanable funds increase , shift right .
c) Savings rate at present increases in such cases , which causes supply of funds to increase .
d) The real interest rate increases ( all other factors constant ) there is movement along the curve , quantity supply of funds rise .
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Explain how each of the following events affect the supply of
loanable funds curve (shift or...
Question 2 (a) (i) Explain how each of the following events affect the supply of loanable...
Question 2 (a) (i) Explain how each of the following events affect the supply of loanable funds curve: The economy is in a recession so people's disposable income is lower. (ii) The stock market is booming so the people's wealth is higher. (iii) Fewer college graduates are finding jobs so expected future income is lower. (iv) The real interest rate increases. (b) In the figure below, the initial supply of loanable funds curve is SLFO and the initial demand for...
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
Does a change in the real interest rate shift the supply of loanable funds curve? Explain...
Does a change in the real interest rate shift the supply of loanable funds curve? Explain your answer. How does a currency drain affect the money multiplier? What are the two channels through which the world economy can affect U.S. aggregate demand? State what changes in the world economy can increase U.S. aggregate demand.
Using the model of loanable funds developed in Chapter 3, explain how the following changes affect...
Using the model of loanable funds developed in Chapter 3, explain how the following changes affect the real interest rate, investment, consumption, and government expenditure. Include the appropriate diagram as part of your answer in each case. Initially assume that consumption depends only on disposable income. (a) The government increases taxes. (b) Expectations about the future profitability of investment improve. (Hint: For a given real interest rate, r, firms will invest a greater amount after expectations improve). (c) How does...
In a different scenario, suppose that the demand and supply curves for loanable funds shown on...
In a different scenario, suppose that the demand and supply curves for loanable funds shown on the following graph occur when the expected future inflation rate is 5%. Then, a sudden shock to the economy causes the expected future inflation rate to rise to 9.6%. Assuming the Fisher effect holds, show the impact that this will have on the loanable funds market by shifting one or both curves on the following graph Tool tip: Click and drag one or both...
Question 10 Many states do have which impose an upper limit on the interest rate that...
Question 10 Many states do have which impose an upper limit on the interest rate that lenders can charge. price ceiling laws usury laws price floor laws minimum interest rate Question 7 Real interest 1.5 20 Loane fund t 25 30 ons of 2009 dolar) The figure above shows the loanable funds market. If the real interest rate is 2 percent, then there will be government intervention in the market to make sure there is no credit crisis. there will...
1. Th e supply of loanable funds: comes from households that consume all of their income...
1. Th e supply of loanable funds: comes from households that consume all of their income results from the desire to accumulate wealth for retirement or for major future expenditures c. is inversely related to the interest rate d. does not depend on the interest rate 2. Both consumer demand and investment demand for loanable funds will be: directly related to the interest rate inversely related to the interest rate c. unrelated to the interest rate A decrease in expected...
22) Which of the following would not increase the supply curve of loanable funds? A) A...
22) Which of the following would not increase the supply curve of loanable funds? A) A Federal Reserve purchase does of U.S. Government securities from commercial banks. B) A higher interest rate. C) An increase in the nation's real income D) All of the above shift the supply. 23) In Keynes's liquidity preference framework, A) the demand for bonds must equal the supply of money B) the demand for money must equal the supply of bonds. C) an excess demand...
Let assume an economy in this year with the following loanable funds (LF) market demand equation....
Let assume an economy in this year with the following loanable funds (LF) market demand equation. Demand: r = 8 – 0.005 * Qp Where, r is the real interest rate (ifr=12 then the interest rate is 12%), Q, in the quantity demanded of loanable funds (total investment). The government expenditures (G) is $300 billion, collected taxes (T) equal to $700 billion, and private saving is $800 billion. 1. Calculate the value of government savings in this economy. Is the...
Figure 13-2 Real Interest Rate Supply of Loarable Funds World interest rate, o Derrand for Loanable...
Figure 13-2 Real Interest Rate Supply of Loarable Funds World interest rate, o Derrand for Loanable Funds Quantity of Loanable Funds Real Exchange Rate Supply of Canadian Dollars (5-1) Quantity of Dollars Refer to the Figure 13-2. If the interest rate was initially at ro and an import quota was imposed, what would happen to the real interest rate? It would decrease because demand would shift left. It would decrease because supply would shift right. It would not change because...
Question 2 (a) (i) Explain how each of the following events affect the supply of loanable funds curve: The economy is in a recession so people's disposable income is lower. (ii) The stock market is booming so the people's wealth is higher. (iii) Fewer college graduates are finding jobs so expected future income is lower. (iv) The real interest rate increases. (b) In the figure below, the initial supply of loanable funds curve is SLFO and the initial demand for...
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
Does a change in the real interest rate shift the supply of loanable funds curve? Explain your answer. How does a currency drain affect the money multiplier? What are the two channels through which the world economy can affect U.S. aggregate demand? State what changes in the world economy can increase U.S. aggregate demand.
In a different scenario, suppose that the demand and supply curves for loanable funds shown on the following graph occur when the expected future inflation rate is 5%. Then, a sudden shock to the economy causes the expected future inflation rate to rise to 9.6%. Assuming the Fisher effect holds, show the impact that this will have on the loanable funds market by shifting one or both curves on the following graph Tool tip: Click and drag one or both...
Question 10 Many states do have which impose an upper limit on the interest rate that lenders can charge. price ceiling laws usury laws price floor laws minimum interest rate Question 7 Real interest 1.5 20 Loane fund t 25 30 ons of 2009 dolar) The figure above shows the loanable funds market. If the real interest rate is 2 percent, then there will be government intervention in the market to make sure there is no credit crisis. there will...
1. Th e supply of loanable funds: comes from households that consume all of their income results from the desire to accumulate wealth for retirement or for major future expenditures c. is inversely related to the interest rate d. does not depend on the interest rate 2. Both consumer demand and investment demand for loanable funds will be: directly related to the interest rate inversely related to the interest rate c. unrelated to the interest rate A decrease in expected...
22) Which of the following would not increase the supply curve of loanable funds? A) A Federal Reserve purchase does of U.S. Government securities from commercial banks. B) A higher interest rate. C) An increase in the nation's real income D) All of the above shift the supply. 23) In Keynes's liquidity preference framework, A) the demand for bonds must equal the supply of money B) the demand for money must equal the supply of bonds. C) an excess demand...
Let assume an economy in this year with the following loanable funds (LF) market demand equation. Demand: r = 8 – 0.005 * Qp Where, r is the real interest rate (ifr=12 then the interest rate is 12%), Q, in the quantity demanded of loanable funds (total investment). The government expenditures (G) is $300 billion, collected taxes (T) equal to $700 billion, and private saving is $800 billion. 1. Calculate the value of government savings in this economy. Is the...
Figure 13-2 Real Interest Rate Supply of Loarable Funds World interest rate, o Derrand for Loanable Funds Quantity of Loanable Funds Real Exchange Rate Supply of Canadian Dollars (5-1) Quantity of Dollars Refer to the Figure 13-2. If the interest rate was initially at ro and an import quota was imposed, what would happen to the real interest rate? It would decrease because demand would shift left. It would decrease because supply would shift right. It would not change because...
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