Derive the market demand for loanable funds

Reference no: EM13263643

The current market rate of interest is 8 percent. At that rate of interest, businesses borrow $500 billion per year for investment and consumers borrow $100 billion per year to finance purchases. The government is currently borrowing $100 billion per year to cover its budget deficit.

A) Derive the market demand for loanable funds, and show how investors and consumers will be affected if the budget deficit increases to $200 billion per year.
B) Show the impact on the market rate of interest, assuming that taxpayers do not anticipate any future tax increases.
C) How would your conclusion differ if taxpayers fully anticipate future tax increases?
D) Suppose 90 percent of the net federal debt was acquired by foreign investors. How would this affect the burden of the debt for U.S. citizens?

Reference no: EM13263643

Questions Cloud

How much do you need to invest at the end of each year : How much do you need to invest at the end of each year (while working) to allow this to happen?

How much do you need to invest today : How much do you need to invest today (once) to have $89,000 at the end of 19 years if you can earn 3.5% annually?

What is the wavelength of this pitch in air : A guitar string is tuned to an E4, The concert pitch standard A440 has a frequency of 440 Hz. What is the wavelength of this pitch in air

Identify a data set that can be used for your process : Next, identify a data set that can be used for your process. The data set must consist of at least 25 data points. If your article does not contain a data set, then you may use the data set from Unit 1. Include the data set in your summary.

Derive the market demand for loanable funds : The current market rate of interest is 8 percent. At that rate of interest, businesses borrow $500 billion per year for investment and consumers borrow $100 billion per year to finance purchases. The government is currently borrowing $100 billion ..

What is the antenna gain-radiated power and eirp : A transmitting antenna has a radiation resistance of 72 ohms, an effective resistance of 8 ohms, a directive gain of 20, and an input power of 100 watts. What is the antenna gain, radiated power, and EIRP

Find the coefficient of staticfriction between wall and pole : A sign for the local cheese shop is hung by two strings of length 0.25 meters at either end from a 4 meter long pole with a mass of 200 kg. what is the coefficient of static friction between the wall and the pole

Find and plot the voltage that appears across the resistor : A perfect conductor joins two ends of a 100 ohm resistor and closed loop is in the region of uniform magnetic flux density B = 10*e^(-t/10) T. Neglecting the self-inductance of the loop, find and plot the voltage V(t)

What size would a sail have to be to accelerate a spaceship : Scientists have proposed using the radiation pressure of sunlight for travel to other planets in the Solar System. If the intensity of the electromagnetic radiation produced by the Sun is about 1.4 kW/m2 near the Earth

User Account

All Pages