Consider the U.S. market for loanable funds in a closed-economy model. Answer the following questions about each scenario.

a. The government starts offering a national savings bond to increase private savings, which pays a higher return than many other options available on the market.

This will shift the (supply of loanable funds to the right, demand for loanable funds to the right, supply of loanable funds to the left, demand for loanable funds to the left) , the interest rate and equilibrium amount of borrowing will (both increase, both decrease, decrease and increase respectively, increase and decrease respectively). .

b. Suppose the economy is now open. Due to rapid economic expansion in China, the Chinese government decides to buy U.S. Treasury notes with some of its surplus.

This will shift the (supply of loanable funds to the left, demand for loanable funds to the left, supply of loanable funds to the right, demand for loanable funds to the right) , the interest rate and equilibrium amount of borrowing will (decrease and increase respectively, both decrease, increase and decrease respectively, both increase) .

c. A new computer software program is introduced into the market, which offers businesses that purchase it promising returns on their investment.

This will shift the (supply of loanable funds to the right, supply of loanable funds to the left, demand for loanable funds to the right, demand for loanable funds to the left) , the interest rate and equilibrium amount of borrowing will (both decrease, both increase, decrease and increase respectively, increase and decrease respectively) .

d. The government increases the capital gains tax, which taxes earnings on assets in the stock market.

This will shift the (supply of loanable funds to the left, supplyof loanable funds to the right, demand for loanable funds to the left, demand for loanable funds to the right) , the interest rate and equilibrium amount of borrowing will (increase and decrease respectively, decrease and increase respectively, both decrease, both increase) .

Question

11-03-2020
Business

contestada

Consider the U.S. market for loanable funds in a closed-economy model. Answer the following questions about each scenario.

a. The government starts offering a national savings bond to increase private savings, which pays a higher return than many other options available on the market.

This will shift the (supply of loanable funds to the right, demand for loanable funds to the right, supply of loanable funds to the left, demand for loanable funds to the left) , the interest rate and equilibrium amount of borrowing will (both increase, both decrease, decrease and increase respectively, increase and decrease respectively). .

b. Suppose the economy is now open. Due to rapid economic expansion in China, the Chinese government decides to buy U.S. Treasury notes with some of its surplus.

This will shift the (supply of loanable funds to the left, demand for loanable funds to the left, supply of loanable funds to the right, demand for loanable funds to the right) , the interest rate and equilibrium amount of borrowing will (decrease and increase respectively, both decrease, increase and decrease respectively, both increase) .

c. A new computer software program is introduced into the market, which offers businesses that purchase it promising returns on their investment.

This will shift the (supply of loanable funds to the right, supply of loanable funds to the left, demand for loanable funds to the right, demand for loanable funds to the left) , the interest rate and equilibrium amount of borrowing will (both decrease, both increase, decrease and increase respectively, increase and decrease respectively) .

d. The government increases the capital gains tax, which taxes earnings on assets in the stock market.

This will shift the (supply of loanable funds to the left, supplyof loanable funds to the right, demand for loanable funds to the left, demand for loanable funds to the right) , the interest rate and equilibrium amount of borrowing will (increase and decrease respectively, decrease and increase respectively, both decrease, both increase) .

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johncastroogbechie johncastroogbechie · Answer 1 · 2020-03-15T04:40:42+01:00

Answer:

(a) The government starts offering a national savings bond to increase private savings, which pays a higher return than many other options available on the market.

This will shift the (supply of loanable funds to the right, demand for loanable funds to the right, supply of loanable funds to the left, demand for loanable funds to the left) , the interest rate and equilibrium amount of borrowing will (both increase, both decrease, decrease and increase respectively, increase and decrease respectively).