Ch 9 HW

Suppose that the government changes the tax code to allow additional amounts of money to be placed in 401k retirement accounts, increasing the extent to which people can delay their tax obligation— effectively, this is a tax cut on retirement savings. Show the effect by shifting the appropriate curve in the market for savings. What is the result?

private investment would increase as the cost of borrowing decreased

the source of the ___ for loanable funds is aving

supply

if the projected rate of return for a project is less than the interest rate for a loan that is necessary to complete the project, how will the business considering the project act?

the business will not take out the loan

does the following even increase or decrease interest rate? an increase in large investments

increase

does the following even increase or decrease the interest rate? an investment tax credit

increase

what is a mechanism by which crowding out occurs?

increases in interest rates

Decide whether each of the scenarios related to the loanable funs market will result in a shift in supply or a shift in demand. Calopolis, a college town in North California, has for many years banned the presence of fast food restaurants in city limits. As of 2012, however, the city will allow several fast foods companies to open franchised locations.

shift in demand

Decide whether each of the scenarios related to the loanable funs market will result in a shift in supply or a shift in demand. due to an increase in revenues after a tax hike, the US is able to eliminate the deficit and begins to maintain a balanced budget for the first time in several decades

shift in demand

Decide whether each of the scenarios related to the loanable funs market will result in a shift in supply or a shift in demand. China decides to reduce its capital investments in the US, as it expects low returns due to a weak US economy.

shift in supply

Decide whether each of the scenarios related to the loanable funs market will result in a shift in supply or a shift in demand. as a result of a stock market boom, individuals begin to feel richer and spend more while also saving less

shift in supply

the ___ represents the price of a loan

interest rate

does the following even increase or decrease interest rate? an increase in savings

decrease

the source of the ___ for loanable funds is investment

demand

which of the following best defines a financial intermediary?

a financial institution that transforms investor funds into financial assets

what is crowding out?

a reduction in consumption and investment spending that results from government borrowing

example of consumption smoothing

all of these are examples of consumption smoothing

does the following even increase or decrease interest rate? a decrease in investor optimism

decrease

the definition on consumption smoothing

borrowing in periods of low income and saving in periods of high income to make consumption less variable than income

which of the terms acts as the "price" in the market for loanable funds?

interest rate

as interest rate decreases, what happens to the quantity of loanable funds demanded?

quantity demanded will increase

what effect will an increase in interest rates have on the quantity of loanable funds supplied?

quantity supplied will increase

suppose that the gov is concerned with the unemployment rate and, as a response, offers a tax credit to any firm that builds a new factory in the US. How does this policy shift the curve for loanable funds?

supply curve shifts to the right

suppose that the government changes the tax code to allow additional amounts of money to be placed in 401K retirement accounts, increasing the extent to which people delay their tax obligations. How does the curve shift for loanable funds?

supply curve shifts to the right