Chapter_13_continued

Chapter_13_continued - surpluses • Government - starts...

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Chapter 13 Saving, Investment, and Financial System (Continued)
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The Market for Loanable Funds Policy 1: saving incentives Shelter some saving from taxation Affect supply of loanable funds Increase in supply Supply curve shifts right New equilibrium Lower interest rate Higher quantity of loanable funds Greater investment
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The Market for Loanable Funds Policy 2: investment incentives Investment tax credit Affect demand for loanable funds Increase in demand Demand curve shifts right New equilibrium Higher interest rate Higher quantity of loanable funds Greater saving
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The Market for Loanable Funds Policy 3: government budget deficits and
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Unformatted text preview: surpluses • Government - starts with balanced budget – Then starts running a budget deficit • Change in supply of loanable funds • Decrease in supply – Supply curve shifts left • New equilibrium – Higher interest rate – Smaller quantity of loanable funds The Market for Loanable Funds • Crowding out – Decrease in investment – Results from government borrowing • Government - budget deficit – Interest rate rises – Investment falls • Government – budget surplus – Increase supply of loanable funds – Reduce interest rate – Stimulates investment The U.S. government debt...
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This note was uploaded on 10/17/2011 for the course HEY jhe taught by Professor He during the Spring '11 term at Drexel.

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Chapter_13_continued - surpluses • Government - starts...

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