105k views
4 votes
Identify the impact on either the supply or demand of loanable funds following the events listed below.

a. If economic conditions deteriorate, prompting households to save a larger portion of their income, then __________ loanable funds will __________.
b. In an effort to balance the budget, the government increases taxes paid by businesses. As a result, the __________ loanable funds will __________.
c. If economic conditions improve, increasing the demand for goods and services, then the __________ loanable funds will __________.
d. Innovations in robotics technology vastly improves productivity within manufacturing firms. As a result, the __________ loanable funds will __________.

WORD BANK
supply of
demand for
increase
decrease

1 Answer

6 votes

Answer:

a. If economic conditions deteriorate, prompting households to save a larger portion of their income, then supply of loanable funds will increase.

b. In an effort to balance the budget, the government increases taxes paid by businesses. As a result, the demand for loanable funds will decrease.

c. If economic conditions improve, increasing the demand for goods and services, then the demand for loanable funds will increase.

d. Innovations in robotics technology vastly improves productivity within manufacturing firms. As a result, the demand for loanable funds will increase.

Step-by-step explanation:

Any changes in household saving patterns will shift the supply curve for loanable funds. When households save more due to deteriorating economic conditions, the total supply of saving increases, shifting the loanable funds supply curve to the right.

An increase in business taxes will reduce the profitability of new investment projects, so the demand for loanable funds will decrease.

An improvement in economic conditions, which increases the demand for goods and services, will cause the demand for loanable funds curve to shift to the right, as businesses find it more profitable to invest in production equipment.

Advancements in robotics technology, leading to increased productivity, will increase the demand for loanable funds, as firms will have an incentive to increase their investment in equipment and machinery.

User Tom Dalton
by
7.5k points