a.Assume that the United States begins deficit spending to fund new social welfare programs. b.Using a...
a.Assume that the United States begins deficit spending to fund new social welfare programs.
b.Using a correctly labeled loanable funds graph, show and explain the impact of the new spending on real interest rates in the United States.
i.Explain the impact of the change in interest rates you identified in part (A) on each of the following:
ii.Capital investment
iii.Long-term economic growth
The international value of the U.S. dollar
2.
a.Assume a visitor from another nation decides to open a checking account at J & R National Bank. The visitor deposits $20,000 that is new money to the Macro Islands economy. The central bank has set a required reserve ratio of 10%.
i.What is the change in the total amount that J & R National Bank can loan out? Explain.
ii.Calculate the total amount that the bank can create? (Calculate means show your work.)
B. Now assume that the Macro Islands government decides to increase spending to fund new projects that will bring in more visitors. Explain what will happen to the demand for loanable funds and real interest rates as a result.
Homework Answers
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a.Assume that the United States begins deficit spending to fund
new social welfare programs.
b.Using a...
7. Dawn states: “As a result of a spending increase by the federal government the budget...
7. Dawn states: “As a result of a spending increase by the federal government the budget deficit increase and this will lead to a decrease in Demand in the loanable funds market and result in lower real interest rates. Do you agree or disagree? Carefully Explain.
Please just draw the graphs. No need to explain/write out the rest. Thanks! 1. Assume that...
Please just draw the graphs. No need to explain/write out the
rest. Thanks!
1. Assume that national savings in the United States increases. Using a correctly labeled loanable funds graph and production possibilities curve, show and explain the impact of the increase in each of the following. savings on L interest rates Long-term economic growth for goods an economy producing capital and consumer 11. b. If the interest rates in the rest of the world remain unchanged, explain the impact...
Draw a graph and explain what happens to the real interest rate in the United States...
Draw a graph and explain what happens to the real interest rate in the United States by using a loanable funds model, everything else held constant. A new wave of computer technology in the United States has been shown to greatly increase worker productivity.
Assume unemployment is high and is a major problem in the United States. In an effort...
Assume unemployment is high and is a major problem in the United States. In an effort to get unemployment back to its natural rate, the Federal Reserve enacts an expansionary monetary policy by purchasing $10 million in U.S. Treasury bonds. If the reserve ratio is 10 percent, what is the maximum increase in money supply that may occur as a result of the Fed’s open market operation? Give one reason why money supply may not increase by the amount given...
(25pts) 2. Suppose the government wants to reduce its budget deficit. Using the long-run model of...
(25pts) 2. Suppose the government wants to reduce its budget deficit. Using the long-run model of the economy developed in Chapter 3, illustrate graphically the impact of the alternative fiscal policy measures indicated in parts (a) and (b) below. Be sure to label: (i) the axes, (ii) the curves, (iii) the initial equilibrium values; (iv) the direction curves shift; and (v) the final equilibrium values. (15) a) Suppose the government decides to reduce the government's budget deficit by reducing government...
1. Assume unemployment is high and is a major problem in the United States. (a) In...
1. Assume unemployment is high and is a major problem in the United States. (a) In an effort to get unemployment back to its natural rate, the Federal Reserve enacts an expansionary monetary policy by purchasing $10 million in U.S. Treasury bonds. i. If the reserve ratio is 10 percent, what is the maximum increase in money supply that may occur as a result of the Fed's open market operation? Answer: ii. Give one reason why money supply may not...
Problem 4.1 Question Help The new bridge to the United States in Southern Ontario and similar...
Problem 4.1 Question Help The new bridge to the United States in Southern Ontario and similar construction projects elsewhere in the country would be expected to help the economy in the short run, because O A. the use of discretionary fiscal policy would create an one time increase in real GDP but result in a job-less recovery. O B. the use of discretionary fiscal policy would create an one time increase in real GDP and employment. O C. the use...
Explain how an increase in national income in Canada and Mexico, causing them to invest more...
Explain how an increase in national income in Canada and Mexico, causing them to invest more into the United States impacts the loanable funds market, what happens to the interest rate in the US and why? What happens to US GDP and why? Does foreign investment impact the loanable funds market in the same way that baby boomer's retiring will? Why or why not? Is foreign investment a good or bad thing for the US? Explain how having positive time...
There are 2 pages in this assignment. There are 3 questions with parts. The weight of...
There are 2 pages in this assignment. There are 3 questions with parts. The weight of each part is indicated in the margin. Please answer the questions carefully. When asked to draw a graph, make sure you label all the curves and the axes. Sloppy work will not be graded or will lose points. Read carefully Chapter 3 as well as your class notes. (30pts) 1. Consider a perfectly competitive economy with K amount of capital and L amount of...
Adirondack Savings Bank (ASB) has $1 million in new funds that must be allocated to home...
Adirondack Savings Bank (ASB) has $1 million in new funds that must be allocated to home loans, personal loans, and automobile loans. The annual rates of return for the three types of loans are 5% for home loans, 13% for personal loans, and 8% for automobile loans. The bank’s planning committee has decided that at least 40% of the new funds must be allocated to home loans. In addition, the planning committee has specified that the amount allocated to personal...
7. Dawn states: “As a result of a spending increase by the federal government the budget deficit increase and this will lead to a decrease in Demand in the loanable funds market and result in lower real interest rates. Do you agree or disagree? Carefully Explain.
Please just draw the graphs. No need to explain/write out the
rest. Thanks!
1. Assume that national savings in the United States increases. Using a correctly labeled loanable funds graph and production possibilities curve, show and explain the impact of the increase in each of the following. savings on L interest rates Long-term economic growth for goods an economy producing capital and consumer 11. b. If the interest rates in the rest of the world remain unchanged, explain the impact...
(25pts) 2. Suppose the government wants to reduce its budget deficit. Using the long-run model of the economy developed in Chapter 3, illustrate graphically the impact of the alternative fiscal policy measures indicated in parts (a) and (b) below. Be sure to label: (i) the axes, (ii) the curves, (iii) the initial equilibrium values; (iv) the direction curves shift; and (v) the final equilibrium values. (15) a) Suppose the government decides to reduce the government's budget deficit by reducing government...
1. Assume unemployment is high and is a major problem in the United States. (a) In an effort to get unemployment back to its natural rate, the Federal Reserve enacts an expansionary monetary policy by purchasing $10 million in U.S. Treasury bonds. i. If the reserve ratio is 10 percent, what is the maximum increase in money supply that may occur as a result of the Fed's open market operation? Answer: ii. Give one reason why money supply may not...
Problem 4.1 Question Help The new bridge to the United States in Southern Ontario and similar construction projects elsewhere in the country would be expected to help the economy in the short run, because O A. the use of discretionary fiscal policy would create an one time increase in real GDP but result in a job-less recovery. O B. the use of discretionary fiscal policy would create an one time increase in real GDP and employment. O C. the use...
There are 2 pages in this assignment. There are 3 questions with parts. The weight of each part is indicated in the margin. Please answer the questions carefully. When asked to draw a graph, make sure you label all the curves and the axes. Sloppy work will not be graded or will lose points. Read carefully Chapter 3 as well as your class notes. (30pts) 1. Consider a perfectly competitive economy with K amount of capital and L amount of...
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