Homework 3 - Emilie Gein Jahiz Barlas Rec. #002 Homework #3...

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Emilie Gein Jahiz Barlas Rec. #002 Homework #3 1. A simple market for loanable funds is a hypothetical market that examines market outcome of demand for funds generated by borrowers and supply provided by lenders. Those who want to lend money (savers) and those who want to borrow (firms with investment spending projects). Price determined is the interest rate, the return a lender receives for allowing borrowers the use of $1 for 1 year. b. 2. Financial markets are important for growth because if firms cannot invest in new capital stock because no savings or no financial markets then there is no increase in productivity and no growth. b. Firm investment adds GDP, producing something, and putting it in the market to be sold. Consumer investment is personal savings, it adds no output, no addition to GDP. c. Investment Side- Y=C+I+G+X-M I=(Y-G-C)+(X-M) Savings Side- S=Sprivate+ Sgovernment+(X-M) S= (Y-T+Tr-C) + (T-G-Tr) + (X-M) S=(Y-G- C) + (X-M) S=I = (Y-G-C) + (X-M) d. In democratic countries people vote for high government spending, high transfers, and
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This homework help was uploaded on 03/30/2008 for the course ECON 1102 taught by Professor Someguy during the Winter '07 term at Minnesota.

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Homework 3 - Emilie Gein Jahiz Barlas Rec. #002 Homework #3...

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