1. Suppose the government restricts foreign lenders from lending money in the US loanable funds market....

1. Suppose the government restricts foreign lenders from lending money in the US loanable funds market. What happens to the equilibrium interest rate in the US?

2. Suppose credit card companies encourages households to spend more. What happens to the equilibrium quantity of loans in the loanable funds market?

Expert Solution

Rahul Sunny answered 2 years ago

Initially, in a borrowing and lending market, or a loanable funds market, there is an equilibrium.

Initially, in a borrowing and lending market, or a loanable funds market, there is an equilibrium. Suppose entrepreneurs' aggregate expectations are that the economy is going to be good next year (i.e. opportunities for investment). What is likely to happen to the equilibrium interest rate under the following scenarios: 1. There is no change in the loan supply curve; 2. Potential lenders disagree with entrepreneurs, lenders view the future economic outlook as negative/riskier. Answer both cases using the theory of loanable fund...

Initially, in a borrowing and lending market, or a loanable funds market, there is an equilibrium....

Initially, in a borrowing and lending market, or a loanable funds market, there is an equilibrium. Suppose entrepreneurs' aggregate expectations are that the economy is going to be good next year (i.e. opportunities for investment). What is likely to happen to the equilibrium interest rate under the following scenarios: 1. There is no change in the loan supply curve; 2. Potential lenders disagree with entrepreneurs, lenders view the future economic outlook as negative/riskier. Answer both cases using the theory of...

The market for loanable funds and government policy The following graph shows the market for loanable...

The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) Demand Supply INTEREST RATE (Percent) LOANABLE FUNDS (Billions...

Use the Market for Loanable Funds, Net Foreign Investment and the Market for Foreign Currency Exchange...

Use the Market for Loanable Funds, Net Foreign Investment and the Market for Foreign Currency Exchange diagrams combined, to examine the impact of a removal of import tariff on each market. In your answer make sure that you fully explain the impact in each market and that you comment on the impact on each of the following variables: 1)private saving 2)public saving 3)national saving 4)investment 5)net foreign investment 6)exchange rate 7)net exports

1. Consider the following scenario. What will happen in the loanable funds market and the foreign...

1. Consider the following scenario. What will happen in the loanable funds market and the foreign exchange market? In a small open economy, the government engages in a trade war and puts an import quota on steel. 2. Explain the effects of capital flight on the loanable funds market and foreign exchange market.

1. If the Canadian government decreases the governmental expenditures, then in the market for loanable funds...

1. If the Canadian government decreases the governmental expenditures, then in the market for loanable funds Select one: a. The real interest rate increases and the investment decreases b. The real interest rate decreases and the investment increases c. The real interest rate increases and the investment increases d. The real interest rate decreases and the investment decreases 2. Suppose that the disposable income increases by 10 units, how much is the change in the consumption level if the Consumption...

Discuss the importance of the market for loanable funds and the market for foreign-currency exchange economic...

Discuss the importance of the market for loanable funds and the market for foreign-currency exchange economic growth.

In the open-economy market for loanable funds, the demand for loanable funds comes from A. domestic...

In the open-economy market for loanable funds, the demand for loanable funds comes from A. domestic investment B. the sum of domestic investment and net capital outflow C. net capital outflow D. national savings

5. The market for loanable funds and government policy The following graph shows the market for...

5. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) DemandSupplyINTEREST RATE (Percent)LOANABLE FUNDS (Billions of dollars)Demand Supply ...

What is the impact on the loanable funds market if the quantity of loanable funds supplied...

What is the impact on the loanable funds market if the quantity of loanable funds supplied is less than the quantity demanded?

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