Choose the best answer in the brackets 1) According to the loanable funds theory, a decrease in trust to commercial banks among the population will result in a decrease of (Choose one: Loanable funds supply, inflation, velocity of money, demand of loanable funds)and will result in(Choose one: decrease, no change, increase) in market interest rates. 2) As a result of the changes described in 1), the private investments into factories and equipment will (Choose one:fall, be crowded out by the government, rise) because(Choose one: more investor would be attracted by highest interest rates, more project would be attractive, fewer intestors would be attracted by lower interest rates, less project would be considered attractive) 3) If the government simultaneously decides to increase the issue of the government bonds, according to the loanable funds theory, (Choose one: inflation, velocity of money, loanable funds supply, demand for loanable funds) will rise, leading to (Choose one: further growth of market interest rate, attracting more investments, additional stimuli to the economics)

Choose the best answer in the brackets 1) According to the loanable funds theory, a decrease in trust to commercial banks among the population will result in a decrease of (Choose one: Loanable funds supply, inflation, velocity of money, demand of loanable funds)and will result in(Choose one: decrease, no change, increase) in market interest rates. 2) As a result of the changes described in 1), the private investments into factories and equipment will (Choose one:fall, be crowded out by the government, rise) because(Choose one: more investor would be attracted by highest interest rates, more project would be attractive, fewer intestors would be attracted by lower interest rates, less project would be considered attractive) 3) If the government simultaneously decides to increase the issue of the government bonds, according to the loanable funds theory, (Choose one: inflation, velocity of money, loanable funds supply, demand for loanable funds) will rise, leading to (Choose one: further growth of market interest rate, attracting more investments, additional stimuli to the economics)

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 5P

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If the interest rate in the loanable funds market is currently below the equilibrium level, then the quantity of funds demanded is ____ the quantity of funds supplied, and we can expect the interest rate to _______ over time. Group of answer choices less than : decrease greater than : decrease less than : increase greater than : increase
Which event could be expected to shift a nation's demand for loanable funds, as shown in the accompanying graph? Interest rate Investment an increase in the productivity of capital a decrease in investor confidence a decrease in consumer wealth an increase in time preferences a drop in the number of retired workers
In the standard loanable funds market graph, … …an increase in the supply of loanable funds (rightward shift)... Group of answer choices A) none of the other options. B) could be caused by a tax increase for individuals on interest earned from savings accounts. C) would cause an increase in the real interest rate. D) could be caused by a tax break for businesses on investment spending. E) would cause a decrease in the real interest rate.
The supply and demand curves for loanable funds are affected by different factors. Classify each event according to which curve shifts, if any, and the direction of the shift. an increase in tax breaks a decrease in the productivity of capital an increase in the real interest rate an increase in investor confidence an increase in life expectancy a decrease in the government budget surplus increase in the demand for loanable funds increase in the demand for loanable funds neither curve shifts increase in the demand for loanable funds increase in the supply of loanable funds increase in the demand for loanable funds Answer Bank increase in the supply of loanable funds increase in the demand for loanable funds decrease in the supply of loanable funds decrease in the demand for loanable funds neither curve shifts
Consider the following policy scenarios and for each scenario diagrammatize and fully explain using analysis for the market for loanable funds how the following government policies affect the economy’s saving and investment. (a) Scenario Policy 1: Suppose the government starts with a balanced budget and then, because of a tax cut or spending increase, starts running a budget deficit. (b) Scenario Policy 2: Suppose the government changes the tax code, allowing individuals to reduce their taxable income if they save money in registered retirement savings plans (RRSPs).
Along with the onset of the pandemic, capital inflows to Monotreme declined. Analyze the impact of this using the loanable funds market model. Would this impact supply of funds or demand for funds curve? How would the equilibrium values of real interest rate and quantity of loans change in response?
Think about factors that may shift the demand for loanable funds. Sort the following scenarios into one of three possibilities: (i) Demand increases, (ii) Demand decreases, or (iii) Demand does not change. Items (5 items) (Drag and drop into the appropriate area below) Expected returns from capital investment increase Categories Government borrowing falls. Demand increases Drag and drop here Interest rates rise. Firms become more optimistic about the future. Demand decreases Drag and drop here Household incomes rise. No change in demand Drag and drop here
Figure 26-5. Figure 26-5 shows the loanable funds market for a closed economy. Interest Rate 7% 6% 5% D S $75 $100 $125 Loanable Funds Refer to Figure 26-5. Starting at point A, a reduction in government spending would cause a) the quantity of loanable funds traded to increase to $125 and the interest rate to fall to 5% (point D). b) the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to 7% (point E). c) the quantity of loanable funds traded to increase to $125 and the interest rate to rise to 7% (point C).
Collaboration with Congress during the Clinton Administration allowed for an aggressive deficit-cutting plan to pass. As a result, the government was able to reach a balanced budget at the end of the 90's. Move the supply and/or demand curves to describe the expected effect that this deficit-reduction likely had upon the loanable funds market. As a result, private investment should have a) decreased as the cost of borrowing increased. b) increased as the cost of borrowing increased. c) increased because the cost of borrowing decreased. d) decreased as the cost of borrowing decreased.
Using the framework of the supply and demand of loanable funds, analyze the possible effect on the equilibrium interest rate in the U.S. in each of the following independent, hypothetical scenarios. a. The economy heats up, leading to higher wages and decreased unemployment. b. Concerned that the credit rating of US Treasury securities will be downgraded, international investors move some money out of the US. c. Congress approves a budget that decreases spending and increases tax rates, thereby driving the deficit down
QUESTION 10 Suppose a new tax bill has just been passed that raises taxes for the majority of people in a country. As a result of the tax increase, explain how interest rates will be affected using the loanable funds theory. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). B I U S Paragraph Arial 14px A v Ix X O 8 OQ x2 X, +, RBC 田用区因

For each of the given scenarios, use the graphs to (1) show what happens in the market for loanable funds and (2) help answer the questions that follow. Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at depository institutions. Initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. Now suppose there is an increase in the tax rate on interest income, from 20% to 25%. INTEREST RATE Market for Loanable Funds SA LOANABLE FUNDS This change causes savers to supply of loanable funds demanded, there is quantity of loanable funds demanded. DA | * ¢ ** ? loanable funds. Because the quantity of loanable funds supplied is now pressure on interest rates. This change in interest rates causes a(n) the quantity in the