macro: changes in the market for loanable funds

The economy of Marthaland had a balanced budget, but an economic boom increased tax revenues. Which of the following should be used to show the effect of the increase in tax revenues on interest rates in Marthaland?

The market for loanable funds

Which of the following leads to a lower real interest rate?

The national budget moves from a deficit to a surplus.

Citizens in Fredland are saving more. Which of the following best describes the impact of this statement on the market for loanable funds?

The supply of loanable funds increases and the real interest rate decreases.

Assume that Noobistan is a closed economy. As a result of increased spending on smartphone games, national savings in Noobistan has decreased. How will the market for loanable funds be impacted, and what will the effect be on the interest rate?

The supply of loanable funds will decrease; the interest rate will increase

The graph below shows the effect of a change in the market for loanable funds. Which of the following best describes an event that could cause the change shown in the graph?

A government runs a budget deficit

Which of the following leads to a higher real interest rate?

An investment tax credit

What relationship is illustrated using the demand for loanable funds?

Borrowers respond to a decrease in real interest rates by borrowing more money.

In response to a particularly severe stock market crash in Burginville, business optimism is at an all-time low, and the demand for capital has decreased. What will be the impact of a decrease in the demand for capital on the market for loanable funds and the stock of capital in Burginville?

Demand for loanable funds will decrease; stock of capital will decrease.

In response to a particularly exciting speech by the president of Hamsterville, business optimism is at an all time high, and the demand for capital has increased. What will be the impact of this increase in the demand for capital on the market for loanable funds and the stock of capital in Hamsterville?

Demand for loanable funds will increase; stock of capital will increase.

The figure below shows the result of a change in the market for loanable funds. Which of the following is the most likely to have caused the shift shown here?

Domestic saving decreases.

People in Hamsterville are looking forward to a long, fun-filled retirement and are saving more money to make sure they can go on trips around the world when they retire. What happens to the interest rate and long-run aggregate supply (LRAS) as a result of what happens to the interest rate?

Interest rate decreases; LRAS increases

Which of the following best describes the impact of a decrease in the demand for capital on the interest rate and the quantity of loans made?

Interest rate decreases; quantity of loans made decreases.

Which of the following would be a result of a government moving from a balanced budget to a budget deficit?

Interest rates increase

The government of Noobistan has introduced a new pension program that guarantees every retired citizen a minimum income. As a result, citizens are saving less for retirement. Which of the following best describes the impact of this statement on the market for loanable funds?

Less savings means that the supply of loanable funds decreases, increasing the interest rate.

The Central Bank of Hamsterville and the government of Hamsterville are trying to control inflation by engaging in contractionary monetary policy and contractionary fiscal policy, respectively. Assume that the budget of Hamsterville was balanced prior to engaging in contractionary fiscal policy. What will be the impact of contractionary fiscal policy and contractionary monetary policy on real gross domestic product(GDP) and the interest rate of Hamsterville?

Real GDP will decrease; impact on interest rates will be indeterminate.

The government of Hamsterville has engaged in expansionary fiscal policy, and the central bank has engaged in expansionary monetary policy. Assume that there is not complete crowding out. What will be the effect of these policies on real gross domestic product (GDP) and interest rates in Hamsterville?

Real GDP will increase; impact on interest rates will be indeterminate.

Which of the following best describes the result of a government moving from a budget deficit to a budget surplus?

Real interest rates decrease

The government of Burginville currently has a balanced budget. Rampant consumer spending in Burginville has led to a decrease in national savings, which has affected real interest rates in Burginville. Which action could the government of Burginville take to offset the effect of a decrease in national savings on real interest rates?

Run a budget surplus.

Princess Buttercup has granted an investment tax credit in Florin. How will the market for loanable funds be impacted and what will the effect be on the interest rate?

The demand for loanable funds will increase; the interest rate will increase

The economy of Burginville had a balanced budget, but a recession decreased tax revenues. Which of the following should be used to show the effect of the decrease in tax revenues on interest rates in Burginville?

The market for loanable funds