Suppose that there was a new invention, increasing the production of goods and service. How would...
Suppose that there was a new invention, increasing the production of goods and service. How would this affect the market for the loanable funds? Will the real interest rate increase or decrease?
Homework Answers
The demand for loanable funds, will increase due to increase in production activities. It will cause demand curve to shift to the right from D0 to D1. So, real interest rate will increase from I0 to I1. The equilibrium quantity of laons will also increase from Q0 to Q1.
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Suppose that there was a new invention, increasing the
production of goods and service. How would...
For some reason, the expectations for future inflation increases dramatically. what effect would this have on...
For some reason, the expectations for future inflation increases
dramatically. what effect would this have on the loanable funds
market?
A. The demand for loanable funds would increase thus increasing
the interest rate level.
B, The demand for loanable funds would decrease thus increasing
the interest rate level.
C. The Supply for loanable funds would increase thus increasing
the interest rate level.
D. The Supply for loanable funds would decrease thus decreasing
the interest rate level.
2. For some reason,...
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...
Suppose a new invention allows corn farmers to shuck corn twice as fast. Illustrate graphically how...
Suppose a new invention allows corn farmers to shuck corn twice as fast. Illustrate graphically how this would affect the corn market.
Show how a decrease in the supply of loanable funds and an increase in the demand...
Show how a decrease in the supply of loanable funds and an increase in the demand for loanable funds can raise the real interest rate and leave the equilibrium quantity of loanable funds unchanged. Draw a demand for loanable funds curve. Label it DLF0. Draw a supply of loanable funds curve. Label it SLF0. Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. Now draw a curve that shows an increase in...
Country X's economy is enjoying political stability and attracting foreign financial capital. At the same time...
Country X's economy is enjoying political stability and attracting foreign financial capital. At the same time Country X's government is borrowing to finance spending. How will these changes affect the loanable funds market in Country X? There will be a decrease in the supply of loanable funds There will be a decrease in the demand for loanable funds There will be an increase in the equilibrium nominal interest rate. C There will be an indeterminate effect on the equilibrium real...
The demand for loanable funds decreases while the supply simultaneously increases. This would cause the equilibrium...
The demand for loanable funds decreases while the supply simultaneously increases. This would cause the equilibrium 1)quantity of loanable funds to increase, but the effect on the equilibrium interest rate would be uncertain. 2)interest rate to decrease, but the new equilibrium quantity would be uncertain. 3)quantity of loanable funds to increase and the equilibrium interest rate to decrease. 4)quantity of loanable funds to decrease and the equilibrium interest rate to increase. 5)interest rate to increase, but the new equilibrium quantity...
The following graph shows the market for loanable funds in a closed economy.
The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. Saving is the source of the supply of loanable funds. As the real interest rate rises, the quantity of loanable funds demanded decreases Suppose the real interest rate is 7%. In this case, the quantity of loanable funds supplied is greater than the quantity of loans...
2. In a closed economy, how would each of the following events affect bond price and...
2. In a closed economy, how would each of the following events affect bond price and market interest rate? Use the figures of both bond market and market of loanable funds to illustrate the changes to the interest rates. a. The economy experiences a business cycle expansion. b. The government proposes a new tax on consumption (spending on goods and services).
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the...
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the world consists of a small open economy (we call this domestic) and the rest of the world (we call this foreign). Answer the following questions with the aid of figures where appropriate a. How does an increase in domestic government expenditure affect trade balance and real exchange rate? (2 points] b. How does an increase in foreign government expenditure affect the trade balance and...
question 4 4. This question concerns how the consumption function affects the analysis of the loanable...
question 4
4. This question concerns how the consumption function affects the analysis of the loanable funds market. Suppose consumption depends on the interest rate, i.e. C = C(Y - T,r). a. b. How will a rise in interest rate affect consumption expenditure and thus national saving? Explain how an increase in government expenditure would affect the economy in the long-run. In particular, explain the effects on investment and consumption. Suppose there is an increase in investment incentive because of...
For some reason, the expectations for future inflation increases
dramatically. what effect would this have on the loanable funds
market?
A. The demand for loanable funds would increase thus increasing
the interest rate level.
B, The demand for loanable funds would decrease thus increasing
the interest rate level.
C. The Supply for loanable funds would increase thus increasing
the interest rate level.
D. The Supply for loanable funds would decrease thus decreasing
the interest rate level.
2. For some reason,...
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...
Country X's economy is enjoying political stability and attracting foreign financial capital. At the same time Country X's government is borrowing to finance spending. How will these changes affect the loanable funds market in Country X? There will be a decrease in the supply of loanable funds There will be a decrease in the demand for loanable funds There will be an increase in the equilibrium nominal interest rate. C There will be an indeterminate effect on the equilibrium real...
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the world consists of a small open economy (we call this domestic) and the rest of the world (we call this foreign). Answer the following questions with the aid of figures where appropriate a. How does an increase in domestic government expenditure affect trade balance and real exchange rate? (2 points] b. How does an increase in foreign government expenditure affect the trade balance and...
question 4
4. This question concerns how the consumption function affects the analysis of the loanable funds market. Suppose consumption depends on the interest rate, i.e. C = C(Y - T,r). a. b. How will a rise in interest rate affect consumption expenditure and thus national saving? Explain how an increase in government expenditure would affect the economy in the long-run. In particular, explain the effects on investment and consumption. Suppose there is an increase in investment incentive because of...
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