Question

In: Economics

4. Write out the equation for the demand and supply of loanable funds or the savings...

4. Write out the equation for the demand and supply of loanable funds or the savings identify. Use this equation/identity to briefly describe how changes in government budgets can affect the trade balance. Include any assumptions you make about the other components of the demand and supply of savings.

Solutions

Expert Solution

GDP = C(Y-T) + I(r) + G + NX

Present Value : PV = FV / (1 + r)n

The demand for loanable funds is determined by the demand from the business sector, from Investment , I .

Supply of loanable funds = total savings = private savings + public savings + foreign savings .

A government budget deficit reduces public savings , so overall total savings fall . So supply of loanable funds reduces .

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Write out the equation for the demand and supply of loanable funds in equilibrium. Use this...
Write out the equation for the demand and supply of loanable funds in equilibrium. Use this equation to briefly describe how changes in government budgets can affect the trade balance. Include any assumptions you make about the other components of the demand and supply of savings. Then explain the difference between a progressive tax, a proportional tax, and a regressive tax.
If the demand for loanable funds shifts to the left and the supply of loanable funds...
If the demand for loanable funds shifts to the left and the supply of loanable funds shifts to the right, then the real interest rate rises. Select one: True False Question text In the open economy macroeconomic model of the U.S. economy, national savings is equal to the difference between domestic investment and net capital outflow. Select one: True False Suppose residents of the United States desired to decrease their purchases of foreign assets. Ceteris paribus, the real exchange rate...
Using the loanable funds theory and the demand and supply of loanable funds, explain what will...
Using the loanable funds theory and the demand and supply of loanable funds, explain what will happen to the real interest rate in an economy if a recession occurs, such as occurred with the Covid19 pandemic.
why is the supply of loanable funds upward sloping? why is the demand for loanable funds...
why is the supply of loanable funds upward sloping? why is the demand for loanable funds downward sloping? Explain the equilibrium interest rate and graph the model.
Factors that affect the demand for loanable funds also affect the supply of loanable funds Question...
Factors that affect the demand for loanable funds also affect the supply of loanable funds Question 57 options: true false
Demonstrate using supply and demand graphs 1. Demand for Loanable Funds increase 2. Demand for Loanable...
Demonstrate using supply and demand graphs 1. Demand for Loanable Funds increase 2. Demand for Loanable Funds decrease 3. Supply for Loanable Funds increase 4 Supply for Loanable Funds decrease 5. Demonstrate graphically the Fisher Effect Draw each graph, label each graph, discuss why the change may occur, and how the change will impact interest rates
Demonstrate using supply and demand graphs 1. Demand for Loanable Funds increase 2. Demand for Loanable...
Demonstrate using supply and demand graphs 1. Demand for Loanable Funds increase 2. Demand for Loanable Funds decrease 3. Supply for Loanable Funds increase 4 Supply for Loanable Funds decrease 5. Demonstrate graphically the Fisher Effect Draw each graph, label each graph, discuss why the change may occur, and how the change will impact interest rates
Consider the economy where the demand for loanable funds from business and the supply of loanable...
Consider the economy where the demand for loanable funds from business and the supply of loanable funds from households (private savings) are: Demand: Q=1000-100r Supply: Q=200r-500 Q is the quantity of loanable funds and r is the interest rate. In both equations, the interest rate is expressed as a percentage (e.g. if the interest rate is 10%, then r in the equation would be 10) Assume this is a closed economy and that the government has a balanced budget. Holding...
The table shows an​ economy's demand for loanable funds schedule and the private supply of loanable...
The table shows an​ economy's demand for loanable funds schedule and the private supply of loanable funds schedule when the​ government's budget is balanced. What is the real interest​ rate, the quantity of​ investment, and the quantity of private saving if the​ government's budget becomes a deficit of ​$2.0 ​trillion? Does crowding out​ occur? If the​ government's budget becomes a deficit of ​$2.0 ​trillion, the real interest rate is ___ percent a​ year, the quantity of investment is ___ ​trillion,...
For each of the following events, -State if the demand for loanable funds or the supply...
For each of the following events, -State if the demand for loanable funds or the supply of loanable funds (or neither) will be affected -Then state if the curve will increase or decrease -Finally indicate the direction of the shift(left or right) Events: A. The government deficit increases. B. People decide to save more C. Net capital outflow increases at each interest rate. D. Domestic investment increases at each interest rate.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT