ECO 1102 Lecture Notes - Lecture 9: Loanable Funds, Government Debt, Due Date

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10 Nov 2015

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ECO 1102 Full Course Notes

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Saving is the source of supply for loanable funds. Investment is the source of demand for loanable funds. The interest rate is the price of a loan. Policy 1- saving incentives: a higher saving rate could lead to a higher rate of growth of gdp. People respond to incentives: consumption taxes like the gst, rrsps, tfsa, resp. Policy 2-investment incentives: an investment tax credit gives a tax advantage to any rm building a new factory or buying a new piece of equipment. Policy 3- government budget de cits and surpluses: government debt is the sum of past budget de cits and surpluses. Crowding out: a decrease in investment that results from government borrowing. In short term, increase your government spending to help the economy during a de cit. Y = c + i + g, c is decreasing, i is decreasing, so g should increase to help the economy.

Related Questions

Supply and demand for loanable funds

The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward sloping blue line represents the demand for loanable funds.

(Saving/Investment) is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded (decreases/increases) .

Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is (Greater/Less) than the quantity of loans demanded, resulting in a (Surplus/Shortage) of loanable funds. This would encourage lenders to (Raise/Lower) the interest rates they charge, thereby (Increasing/Decreasing) the quantity of loanable funds supplied and (Increase/Decrease) the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of ______%.

carmineminnow364

The following graph shows the market for loanable funds in a closed economy. The upward-sloping line shows the supply of loanable funds and the downward sloping line shows the demand for loanable funds.

(Saving/Investment) is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded (decreases/increases) .

as the interest rate falls, the quantity of loanable funds demanded

lemonfish952

QUESTION 11

If the demand for investment loans rises, this could be the result of

		the discovery of new and better roundabout methods of production.
		a lower rate of time preference in society.
		a lower interest rate.
		a higher interest rate.
		a and c

1 points

QUESTION 12

Which of the following statements is true?

		All persons have a high rate of time preference.
		People with a high rate of time preference are more likely to be borrowers than people with a low rate of time preference.
		People with a high rate of time preference are more likely to be lenders than people with a low rate of time preference.
		A high interest rate is the cause of a high rate of time preference.
		none of the above

1 points

QUESTION 13

Which of the following statements is true?

		The nominal interest rate is always higher than the real interest rate since the nominal interest rate equals the real interest rate plus the expected inflation rate.
		The nominal interest rate is always lower than the real interest rate since the nominal interest rate equals the real interest rate minus the expected inflation rate.
		The nominal interest rate can equal the real interest rate, but to do so the expected inflation rate must be zero percent.
		It is the nominal interest rate-not the real interest rate-that matters to borrowers.

1 points

QUESTION 14

If there is an increase in the expected inflation rate, then,

		the supply and demand for loanable funds will decrease.
		the supply and demand for loanable funds will increase.
		the supply of loanable funds will decrease, and the demand for loanable funds will increase.
		the supply of loanable funds will increase, and the demand for loanable funds will decrease.

1 points

QUESTION 15

If suddenly a 4 percent inflation rate (instead of a zero percent inflation rate) is expected by both suppliers and demanders in the loanable funds market, then

		the demand for loanable funds curve will shift rightward, and the supply of loanable funds curve will shift leftward.
		the demand for loanable funds curve will shift leftward, and the supply of loanable funds curve will shift rightward.
		both the demand for loanable funds curve and the supply of loanable funds curve will shift leftward.
		both the demand for loanable funds curve and the supply of loanable funds curve will shift rightward.

ECO 1102 Lecture Notes - Lecture 9: Loanable Funds, Government Debt, Due Date

ECO 1102 Full Course Notes

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