4.Consider the following demand and supply schedules of loanable funds. All figures are in billiondollars. Assume zero budget deficits and a closed economy.a.InterestRate12%10%8%6%4%2%Quantity of FundsDemanded$200$300$400$500$600$700Determine the following equilibrium outcomes:(1) The interest rate.(ii) Private savings.(iii) Government (public) savings.(iv) Private business investment.Quantity of FundsSupplied$1000$900$800$700$600$500 b. The government has decided to increase government spending (G) by $200 billion andplans to fund the spending by borrowing the funds and running a budget deficit. Assumethat the supply schedule remains unchanged. Determine the new values for:(1) The interest rate.(ii) Private savings.(iii) Government (public) savings.(iv) Private business investment.(v) The amount of crowding out.

Equilibrium in funds market and a stable interest rate is achieved at the point where demand and…

4. Consider the following demand and supply schedules of loanable funds. All figures are in billion dollars. Assume zero budget deficits and a closed economy. Interest Rate 12% 10% 8% 6% 4% 2% Quantity of Funds Demanded $200 $300 $400 $500 $600 $700 Quantity of Funds Supplied $1000 $900 $800 $700 $600 $500

4. Consider the following demand and supply schedules of loanable funds. All figures are in billion dollars. Assume zero budget deficits and a closed economy. Interest Rate 12% 10% 8% 6% 4% 2% Quantity of Funds Demanded $200 $300 $400 $500 $600 $700 Quantity of Funds Supplied $1000 $900 $800 $700 $600 $500

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Savings,investment And The Financial System

Section: Chapter Questions

Problem 4PA

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Similar questions

8. Suppose the government borrow $20 billion more next year than this year. Use a supply-and demand diagram to analyze this policy . Does the interest rate rise or fall ? 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. How does the elasticity of supply of loanable funds affect the size of these changes ? How does the elasticity of demand for loanable funds affect the size of these changes? Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future . what does this belief do to private saving and the supply of loanable funds today? Does it increase or decrease the effects you discussed in part (a) and (b)?
HOw wil his change the Scenario 2: The government increases deficit spending by $100 Billion dollars to invest in green energy throughout the country. 1.What effect will this have on the demand for loanable funds? 2. What effect will this change have on the interest rate? 3. How will this change the behavior of consumers? Scenario 3: Unemplovment decreases throughoutthe country causing a dramaticincrease in
1. Use the analysis for the market for loanable funds diagram to illustrate and explain how the followinggovernment policy affect the economy’s saving and investment. Policy 1: Suppose the government startswith a balanced budget and then, because of a tax cut or spending increase, starts running a budgetdeficit.For your answer state and explain(i) which which loanable funds curve would this policy affect?(ii) which way would the loanable funds curve shift?(iii) what would be the the impact on interest rates?
8 Demand, Supply 7 10 4 REAL INTEREST RATE (Percent) 3 2 - 10 20 30 40 50 60 70 80 QUANTITY OF LOANABLE FUNDS (Billions of dollars) Refer to Figure 33-1. If the real interest rate is 3 percent, the quantity of loanable funds demanded is $50 billion, and the quantity supplied is $30 billion. $20 billion, and the quantity supplied is $60 billion. $50 billion, and the quantity supplied is $60 billion. $30 billion, and the quantity supplied is $50 billion.
Suppose the government borrows $20 million more next year than this year. Answer questions d and ea. Draw and fully label a diagram to illustrate the market for loanable fund to analyzethis policy.b. Does the rate of interest rise or fall? c. What happens to investment? To private savings? To public savings? To nationalsavings? d. How does the elasticity of the supply of loanable funds affect the size of thesechanges? e. How does the elasticity of the demand of loanable funds affect the size of thesechanges?
5. Public debt is the borrowing taken by when government revenue is less than spending. a. the general public - consumers b. government entities c. Investment banking firms d. the IMF and World Bank
1. Draw a graph when government run a change in the tax that might increase private saving. How would it affect the market for loanable funds?
Question 19 8 Real interest rate (percent per year) a 10 A 2 0 150 300 450 600 750 900 Loanable funds (billions of 2012 dollars) less than $450 billion. In the above figure, the demand for loanable funds curve is drawn for the average expected profit. If the real interest rate is constant at 6 percent and the expected profit falls, the amount of loanable funds demanded will be between $450 billion and $600 billion. DLF greater than $600 billion. $450 billion. 2 pts
If there is a surplus of loanable funds, then 1) the quantity demanded is greater than the quantity supplied and the interest rate will rise. 2) the quantity demanded is greater than the quantity supplied and the interest rate will fal. O 3) the quantity supplied is greater than the quantity demanded and the interest rate will rise. 4) the quantity supplied is greater than the quantity demanded and the interest rate will fall.
1. Suppose the government borrows $20 million more next year than this year. a. Draw and fully label a diagram to illustrate the market for loanable fund to analyzethis policy. b. Does the rate of interest rise or fall? c. What happens to investment? To private savings? To public savings? To nationalsavings?