Economics answers - Running Head MACRO(ECON1010 1sem 2017...

Running Head: MACRO (ECON1010), 1sem 2017
MACRO1 (ECON1010) Assignment 1
(Chapter 28, 26&27)
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1. Analyze the effects of the following events using the loanable fund market diagram where we
have (real) interest rate on the vertical axis and the quantity of loanable fund on the horizontal
axis. Please ensure to explain what happens to saving, investment and (real) interest rate.

MACRO (ECON1010), 1sem 2017
a) Consumers decide to save more to prepare themselves for the future (at any given
interest rate). Assume the government budget balance is zero. (3 marks)
1

MACRO (ECON1010), 1sem 2017
b) A reduction of income tax rate by noting that the source of the supply of loanable funds
coming from both private as well as public saving (3 marks)
2