Register
Suppose that a country is in a recession and the government decides to increase spending. It commissions a very large statue for $50 million. To pay for the statue, the government borrows all of the $50
267,199 views
25 votes
25 votes
Suppose that a country is in a recession and the government decides to increase spending. It commissions a very large statue for $50 million. To pay for the statue, the government borrows all of the $50 million. As a result, the interest rate increases from 3% to 4%, and the equilibrium quantity of loanable funds increased from 500 million to 530 million.

Required:
Sketch a graph for the loanable funds market to represent this scenario.

User Fiery Phoenix
by
2.5k points

1 Answer

21 votes
21 votes

Answer:

See the attached photo for the graph for the loanable funds market

Step-by-step explanation:

Note: See the attached photo for the graph for the loanable funds market to represent this scenario.

In the attached photo, the equilibrium quantity of loanable funds is on the horizontal axis, while the interest rate is on the vertical axis.

The graph shows that there is a positive relationship between the equilibrium quantity of loanable funds and the interest rate. That is, as the interest rate rises, the equilibrium quantity of loanable funds also rises.

Suppose that a country is in a recession and the government decides to increase spending-example-1
User MarkW
by
3.1k points
Ask a Question
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

1.6m questions

2.0m answers

Other Questions

If the rate of inflation in Japan dramatically increases while the rate of inflation in the United States remains constant, then a. the demand curve for dollars shifts to the left. b. the demand curve
If you buy a one-year bond for $4,000 and the issuer pays you back $5,000 at the end of one year, the interest rate on the bond is
Kylie is risk averse and has $1,000 with which to make a financial investment. She has three options. Option A is a risk-free government bond that pays 5 percent interest each year for two years. Option
From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that Group of answer choices bond interest is deductible for tax purposes. interest must be
In January of the current year, Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. Several months later in the same year after the gift, a $500 dividend
Link Copied!