5. The market for loanable funds and government policy The following graph shows the loanable funds market. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Consider each scenario separately by returning the graph to its starting position when moving from one scenario to the next. (Note: You will not be graded on any changes you make to the graph.) INTEREST RATE (Percent) Demand Supply LOANABLE FUNDS (Billions of dollars) Demand Supply
Q: Robert spends his income on lattes and all other goods. Lattes cost $4 each. If his income increases…
A: The budget line shows the different combinations of two goods that a consumer can consume given the…
Q: Year 1960 1970 1980 1990 2000 Real GDP per Capita $1,571 2,777 4,830 9,959 15,881 (Table: South…
A: Real GDP per capita is obtained by dividing the Real GDP of an economy with its population. It…
Q: The demand for salt is price inelastic and the supply of salt is price elastic. The demand for…
A: Elasticity measures the responsiveness of quantity with respect to change in price.
Q: If demand is inelastic and a monopolist raises its price, quantity would fall by a Z. Therefore, a…
A: A market with many buyers and only one vendor is called a monopoly. Because of the monopoly, the…
Q: Interest rates in Eturia are shown in the following table. 2013 2014 2015 Nominal Interest Rate 8%…
A: The real interest rate is inflation-adjusted nominal interest rate. Adding the inflation rate to the…
Q: A one-year long forward contract on a non-dividend - paying stock is entered into when the stock…
A: Cash flow:The sum of the total money is represented in the diagram. It represents the magnitude and…
Q: Aggregate demand will shift to the right if one or more of its the components increases spending…
A: Macroeconomic analysis is the bedrock of modern economics, giving important information about a…
Q: Refer to the graph shown. Calculate the approximate elasticity of demand for the line segment CD:…
A: The elasticity of demand is a computation of how sensitive the quantity demanded of a product is to…
Q: If the marginal propensity to consume was 0.7, how large would each of the following need to be in…
A: The marginal propensity refers to the amount, by which consumption changes when income changes. It…
Q: 2. Brock Lee decided to sell his stock due to the recent market turbulence and instead put the…
A: Future value refers to the value of a current asset at a future date based on an assumed rate of…
Q: Figure 7-8 Price Equilibrium price A B с D E F G Q₂ Equilibrium quantity a. E + F b. A+B+D+D+E+F…
A: The demand curve is the downward-sloping curve. The supply curve is the upward-sloping curve.The…
Q: The concept of marginal utility: can only be applied to situations in which individuals can choose…
A: Analyzing consumer behavior and resource allocation can be done using marginal utility. The concept…
Q: Question 4. According to the textbook, when a supervisor tells someone that his or her performance…
A: Human resource management and organizational psychology are related to the issue you presented. It…
Q: 7. Producer surplus in the short and long run The following graph shows the supply of (orange curve)…
A: Consumer surplus is the gain of the consumer that is when the consumer is willing to pay more but…
Q: 4. Refer to Figure 1. The firm's maximum profit is a. $-5,000.00. b. $0. $5,000.00. $8,887.78. C. d.
A: Monopolistic competition is such market where there are large number of buyers and sellers selling…
Q: At an annual interest rate of 14 percent, about how many years will it take $100 to double in value?…
A: The time value of money states that an amount of money in the hand will hold a higher value today…
Q: BN7.3 (a) (b) Survivor 1 & Survivor 2 are lost in the Woods. The Quantities of Good A & Good B are…
A: The Edgeworth box diagram includes a graphical representation of the market that consists of the two…
Q: You and your friend Casey N. have just stared a new firm manufacturing electric longboards and are…
A: A new manufacturing firm needs a production facility to be started at one of the following…
Q: Consider the table of GDP and population for several imaginary countries. $ Country Wrigleyville…
A: GDP is the gross domestic product. GDP is defined as the market value of all the final goods and…
Q: The following table shows the hourly output per worker measured as quarts of olive oil and pounds of…
A: This can be defined as a cost that shows the type of cost that an individual, business, or any other…
Q: 25 ATC AVC # 100 The exhibit shows a formers marginal cost everage total cost, and average variable…
A: Total variable cost (TVC) is the sum of all costs that vary with the level of production or output…
Q: pls help asap
A: In Ontario, Canada, specific provisions in auto insurance policies are known as the OPCF 27…
Q: Which of the following activities are prohibited by the Clayton Act when they lead to less…
A: Business economics is the study and analysis of commercial barriers affecting businesses using…
Q: Price ($) 42 29 20 11 A B G M 6 C Z DIE 11 O דו ㅈ 16 If price is set at $11 in the market shown in…
A: The area below the equilibrium price and above the above the supply curvewill be termed the producer…
Q: If income is doubled and all prices are doubled, then the demand for luxury goods will more than…
A: A luxury good is a product or service that is not considered a necessity for daily living but is…
Q: Suppose a movie theater determines it can charge different prices to patrons who go to weekday…
A: Price elasticity of demand refers to the percentage change in the quantity demanded of a goods or…
Q: Label each of the following scenarios as either frictional unemployment, structural unemployment, or…
A: A state in which individuals who are willing and able to work are unable to find suitable employment…
Q: Consider two hypothetical economies that are perfectly similar except for their marginal propensity…
A: The marginal propensity to consume (MPC) measures the proportion of an increase in disposable income…
Q: A firm faces the following total cost curve in the short-term: TC₁=4+2Y;². The firm decided that it…
A: Perfect competition is a market with a high number of buyers and a high number of sellers. Firms…
Q: Assume that a firm’s marginal cost is $10 and the elasticity of demand is -2. We can conclude that…
A: Elasticity of demand measures the responsiveness of quantity demanded with respect to change in…
Q: Decisions for Tomorrow In 2019, 360,000 electric vehicles (EVS) were sold in the United States.…
A: Elasticity in economics is important because it measures how sensitive a quantity is to changes in…
Q: A new oven will save $130 per year in electricity expense. How much can we afford to pay for this…
A: An annuity's present value is what a sequence of future regular deposits are worth now. This…
Q: The following table shows data on con mption, investments, exports, Imports, and government…
A: A crucial economic metric, the gross domestic product (GDP) represents the total value of all goods…
Q: mize profit n producing two goods that are related in conse O total marginal revenue equals total…
A: Marginal revenue is the change in total revenue when one additional unit of good is sold out. The…
Q: PB11. 9.6 Record journal entries for the following transactions of Noreen Turbines. Jan. 1, 2018…
A: The accounting area, and specifically the accounting for notes receivable, interest income, and…
Q: Price $28 26- 24 22 20- 18.- 16 14- 12 10 8 6 4 2- 0 10 30 50 70.90 110 130 150 Quantity Refer to…
A: Market efficiency is attained when the allocation of resources maximizes total surplus in the…
Q: Name the type of institution that is responsible for promoting a stable environment for the economy…
A: Stable environment for the economy refers to the environment which facilitates ease of doing…
Q: The Camera Shop sells two popular models of digital SLR cameras (Camera A Price: 230, Camera B…
A: The total revenue from the sale of the two camera models is given by the following equation:Total…
Q: *2.2 Guerdon always puts half a sliced banana, q₁, on his bowl of cereal, 9₂ -the two goods are…
A: Utility is the want satisfying power of a commodity, It is measured cardinally and ordinally. The…
Q: How would we compute the present discounted value of payments of $8,000 received three years in the…
A: The present discounted value gives the amount of dollars that an individual is willing to invest for…
Q: A breakfast place, a perfectly competitive eatery, sells its special for $5. Cost of waiters, cooks,…
A: In a perfectly competitive market, businesses operate at the point where price equals marginal…
Q: Problem 14 A monopolist has an inverse demand curve given by p(y) = 12-y and a cost curve given by…
A: Demand function of a Monopoly : p = 12 - y Cost function : c = y
Q: Figure 7-4 Price P₂ P₁ A • C D B Q₂ 8₂ Quantity Refer to Figure 7-4. What will NOT occur when the…
A: The producer surplus is the benefit received by the producer by selling a quantity of goods in the…
Q: Which of the following is an example of investment, as a component of GDP? The purchase of bridges…
A: Investment refers to the allocation of resources or money in expectation of profit.Usually we invest…
Q: it is making a profit. Oit should increase its output to maximize profit. Oit is incurring a loss.…
A: In a perfectly competitive market, a firm produces where the P=MC. price is determined by the…
Q: Using the graph on the right, determine the output range over which increasing returns to scalo…
A: The technological relation between input and output is called the production function. The greatest…
Q: If Ferdinand prefers a Big Mac to a Whopper and a Whopper to a hotdog, but is indifferent between a…
A: Consumer decisions resemble a riddle, where personal inclinations reveal concealed advantages.…
Q: Will a U.S. Treasury bill have a risk premium that is higher than, lower than, or the same as that…
A: Treasury bills refer to short-term debt securities issued by central bank or other department on…
Q: Is loss or damage caused by earthquake insurable? Yes, it is one of the insured perils usually…
A: An insurance is a contract in which an individual or organization, known as the insured, pays an…
Q: Consider an exchange economy with two agents, A and B, and two commodities, X and Y. Assume their…
A: The Edgeworth box is an interesting concept that depicts an equilibrium condition for an economy…
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 3 images
- U3e the tollowing graph to show the effects on the Market for Loanable Funds of businesses discovering they have more than enough capital to meet the demand for their goods: Instructions: Drag the demand curve to illustrate the appropriate change in demand. Market for Loanable Funds Interest Rate 100 Supply (Savings) 90 80 70 60 50 Demand (Investment) 40 30 20 10 10 20 30 40 50 60 70 80 90 100 Dollar volume of Savings, InvestmentShow how an increase in the supply of loanable funds and a decrease in the demand for loanable funds can lower the real interest rate and leave the Real interest rate (percent per year) 12- equilibrium quantity of loanable funds unchanged. 10- Draw a demand for loanable funds curve. Label it DLF,. Draw a supply of loanable funds curve. Label it SLF,. Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. 8- 6- Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF,. Draw a curve that shows an increase in the supply of loanable funds. Draw it in such a way that the equilibrium quantity of loanable funds does not change. Label it SLF,. 4- 2- Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2. 0- Loanable funds (trillions of 2007 dollars) >>> Draw only the objects specified in the question.8- Describe how the following statements affect either the supply or the demand for loanable funds. For each statement below, do the following: Explain whether the event affects either the demand or the supply of loanable funds. Describe how the statement will affect the equilibrium interest rate and quantity of loanable funds. Draw a graph to demonstrate each answer. Please remember to label each part of the graph. Indicate the change in the interest rate and the quantity of loanable funds on your graph. Analyze each event independently. (Hint: Review the slides and recordings of Lecture 4 for similar graphical analysis). Statements: a) "The national-level saving rate is important from a macroeconomic perspective, in the sense that higher savings tend to strengthen the economy over the long run." b) “Slow-trend growth is reducing the opportunities for profitable long-term investments. The recent downturn in business investment was less of a cyclical blip than a sign of things to…
- Use the loanable funds market to illustrate the effect of the following events on the equilibrium. Illustrate the effects on the interest rate and quantity of investment-savings a) The proportion of retired people in the population goes up. Think that usually retired people generally save less than working people at any interest rate. b) At any given interest rate, consumers decide to save more (assume the budget balance is zero). c) At any given interest rate, businesses become very optimistic about the future profitability of investment spending (assume the budget balance is zero).7- We have the following data from the loanable funds market for Berberistan. Answer the following questions. Real interest rate Loanable funds Loanable funds supplied (trillions of dollars) demanded (percent per year) 3 10 4 4 5 8. 6. 6. 7 7 7 8 9. 9 4 10 a) What is the equilibrium real interest rate, total private saving and investment? (suppose that the government budget is balanced.) b) What will be the equilibrium real interest rate if the government's budget becomes a deficit of $2 trillion? What will be the private investment at the new equilibrium? Define "crowding-out" and tell if there is crowding-out in this case.The following graph shows the loanable funds market. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Consider each scenario separately by returning the graph to its starting position when moving from one scenario to the next. (Note: You will not be graded on any changes you make to the graph.) 14 INTEREST RATE (Percent) Demand Supply LOANABLE FUNDS (Billions of dollars) Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 18%. Now suppose there is a decrease in the tax rate on interest income, from 18% to 14%. Shift the appropriate curve on the graph to reflect this change. Demand Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending…
- Show the effect on the real interest rate and equilibrium quantity of loanable funds of an increase in the demand for loanable funds and a smaller increase in the supply of loanable funds. Draw a demand for loanable funds curve. Label it DLF. Draw a supply of loanable funds curve. Label it SLF. Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. Real interest rate (percent per year) 12.0 Draw a curve that shows an increase in the demand for loanable funds. Label it DLF,. 10.0- Draw a curve that shows a smaller increase in the supply of loanable funds. Label it SLF,. Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2. 8.0- 6.0- 4.0- 2.0- 0.0+ 0.0 1.0 2.0 3.0 Loanable funds (trillions of 2012 dollars) 4.0 5.0 >>> Draw only the objects specified in the question. Click the graph, choose a tool in the palette and follow the instructions to create your graph. MacBook Air DD DII F11 F10 F9 000 000 F8 F7…Draw a graph depicting interest rates at the quantity of loanable funds. Answer the following questions regarding this graph. Explain why the supply of loanable funds is upward sloping. Explain why the demand of loanable funds is downward sloping. If the Federal Reserve sells government bonds, show what will happen to this graph. Explain the effects on interest rates and the quantity of loanable funds. If the Federal Reserve lowers the required reserve rate, show what will happen to this graph. Explain the effects on interest rates and the quantity of loanable funds.1. In the model of the market for loanable funds, which of the following best describes why the supply curve is upward sloping? a The higher the interest rate, the more likely households are to spend b The higher the interest rate, the less likely firms are invest c The higher the interest rate, the more likely households are to borrow d The higher the interest rate, the more likely households are to save
- Question 7 Use the market for saving and investment to show the effect of the following: Firms are forced to close down due to the coronavirus outbreak. Real interest rate (percent per year) 10 8 6 4 2 The savings function [Select] The investment function [Select] The real interest rate [Select] 1.2 SLF The level of savings and investment [Select] DLF 1.4 1.6 1.8 2.0 2.2 Loanable funds (trillions of 2009 dollars)QUESTION 7 Use the following diagram to answer this question The accompanying graph shows the market for loanable funds in equilibrium. Interest rate (%) 12 10 8 6 4 2 0 S E X 2 D 3 4 6 5 Quantity of loanable funds (trillions of dollars) Which of the following might produce a new equilibrium interest rate of 2% and a new equilibrium quantity of loanable funds of $1 trillion? OA. Consumers have increased consumption as a fraction of disposable income. OB. Businesses have become more pessimistic about the future and, as result; they plan to cut back on their spending. OC. The federal government has a budget surplus rather than a budget deficit. OD. The federal government has a budget deficit rather than a budget surplus. uhmit. Click Save All Answers to save all answers.EXERCISE 10.9 LIMITS ON LENDING Many countries have policies that limit how much interest a moneylender can charge on a loan. Do you think these limits are a good idea? Who benefits from the laws and who loses? What are likely to be the long-term effects of such laws? Tips: For Question 2, you may think about how a low interest rate would affect the poor and those who owe huge debts. For Question 3, you may think about how it would affect the profitability of the banking sector and the supply of lending (will lenders be encouraged to lend more?), and what implications it may have for "credit rationing" (being credit constrained).