eco macro 4

Kathleen is considering expanding her dress shop. If interest rates rise she is

less likely to expand. This illustrates why the demand for loanable funds slopes downward.

GDP = $120,000; consumption = $70,000; private saving = $9,000; national saving = $12,000. (6-9) For this economy, investment amounts to

$12,000.

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

-500 0 2000 none

Assuming the market for loanable funds is in equilibrium, use the following numbers to determine the quantity of loanable funds supplied. GDP $8.7 trillion Consumption Spending $3.2 trillion Taxes Net of Transfers $2.7 trillion Government Purchases $3.0 trillion

2.5 tril

For this economy, government purchases amount to

38,000

For this economy, taxes amount to

41,000

If the inflation rate is 2 percent and the real interest rate is 3 percent, then the nominal interest rate is

5%

Which of the following events would shift the supply curve from S1 to S2?

In response to tax reform, households are encouraged to save more than they previously saved.

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Interest rates would rise.

On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars.(19-20) Which of the following events could explain a shift of the demand-for-loanable-funds curve from D1 to D2?

The tax code is reformed to encourage greater investment.

Which of the following is a financial intermediary?

a mutual fund

This economy's government is running a

budget surplus of $3,000.

Which of the following lists correctly identifies the four expenditure categories of GDP?

consumption, government purchases, investment, net-exports

The position and/or slope of the Supply curve are influenced by

he level of public saving. the level of national saving. decisions made by people who have extra income they want to save and lend out.

The primary economic function of the financial system is to

match one person's saving with another person's investment.

For an imaginary closed economy, T = $5,000; S = $11,000; C = $50,000; and the government is running a budget deficit of $1,000. Then

private saving = $12,000 and GDP = $67,000.

A larger budget deficit

raises the interest rate and reduces investment.

If Congress instituted an investment tax credit, the interest rate would

rise and saving would rise.

The supply of loanable funds would shift to the right if either

tax reforms encouraged greater saving or the budget deficit became smaller.

The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. (17-18) What is measured along the vertical axis of the graph?

the real interest rate