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
