Loanable funds quiz

Interest is reduced and investment rises

A budget surplus increases fhe supply of loanable funds.. it does what to interest rate and investment.

When a household buys a bond from a firm, or when a household makes a deposit in a bank which in turn uses the funds to make loans

How can saving occur directly? Or indirectly?

By borrowing from the public in the bond market

How do gov finance budget deficits?

- a budget deficit wouldn't affect the demand because it doesn't influence the amount that households and firms want to borrow to finance investment. - when they run a deficit public savings is negative & reduces national saving in other words when the government borrows to finance its budget deficit, it reduces the supply of loanable funds available to finance investment by households and firms - shifts supply curve to the left

How does budget deficit affect thr loanable funds?

The supply of loanable funds

In all cases.. saving is the source of..

Demand

Investment represents whcih curve on loanable funds graph?

- saving investment : reforming tax code to encourage greater savings. (Expand eligibility for individual retirement accounts, that allow people to shelter some of their saving from taxation, this would alter household decisions to save at any given interest rate so it would affect supply.. shift right) - investment incentives : investment tax credit. (This would reward firms that borrow and invest in new capital and alter investment at any rate and change the demand) - gov. budget deficits and surpluses : deficit- excess of gov. spending over tax revenue.. surplus- excess of tax revenue

Name three policices the government can implent to affect the economys savings and investment

National savings= private saving + public saving

Supply of the wuantity of loanabke funds is composed of

Market for loanable funds

The market in which those who want to save supply funds and those who want to borrow to invest demand funds

People who have extra income they want to save and lend out

The supply of loanable funds comes from..

Interest rate

This is the price of the loan and represents the amount that borrowers pay for loans and the amount lenders recieve on their savings

Interest rate rises and investment falls

When the govenrment reduces national savings by running a busget deficit... the interest rate and investment..