48. Refer to Figure 3. Which of the following events could explain a shift of th
ID: 1166441 • Letter: 4
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48. Refer to Figure 3. Which of the following events could explain a shift of the demand-for-loanablefunds curve from to ? a. The tax code is reformed to encourage greater saving. b. The tax code is reformed to encourage greater investment. c. The government starts running a budget deficit. d. The government starts running a budget surplus. 49. Refer to Figure 3. Regard the position of the Supply curve as fixed, as on the graph. If the real interest rate is 4 percent, the inflation rate is 2 percent, and the market for loanable funds is in equilibrium, then the position of the demand-for-loanable-funds curve must be a. . b. . c. between and . d. to the left of . 50. Refer to Figure 3. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent, then the equilibrium real interest rate is a. lower than 6 percent. b. 6 percent. c. between 6 percent and 8 percent. d. higher than 8 percent.
Figure 3. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars Supply 8% $50 $62 48. Refer to Figure 3. Which of the following events could explain a shift of the demand-for-loanable- funds curve fromto 2 a. The tax code is reformed to encourage greater saving b. The tax code is reformed to encourage greater investment c. The government starts running a budget deficit d. The government starts running a budget surplus 49. Refer to Figure 3. Regard the position of the Supply curve as fixed, as on the graph. If the real interest rate is 4 percent, the inflation rate is 2 percent, and the market for loanable funds is in equilibrium, then the position of the demand-for-loanable-funds curve must be a. b. D c. between Di and P. d. to the left of Di 50. Refer to Figure 3. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent, then the equilibrium real interest rate is a. lower than 6 percent. b. 6 percent c. between 6 percent and 8 percent. d. higher than 8 percent.Explanation / Answer
48. Demand for loanable funds is determined by investment. Increase in investment increases demand for loanable funds, therefore shifting the demand curve rightward and reduction in investment decreases the demand for loanable funds.
Answer- option B
49. On the horizontal axis of the graph, 'r' represents the real interest rate which is adjusted for the inflation rate. If the real interest rate is 4? and the loanable funds market is in equilibrium, then the position of the demand for loanable funds curve must be to the left of D1 curve.
Answer- option D
50. If the equilibrium quantity of loanable funds is $56 billion, then the demand for loanable funds curve must be between D1 and D2 , while supply curve is fixed. Therefore, the equilibrium real interest rate is between 6? and 8? and real interest rate is adjusted for the inflation rate.
Answer- option C
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