Changes of Demand & Supply in Loanable Funds Flashcards
The Supply and Demand for Loanable funds shifts __
Constantly
When the curve for Supply and Demand for Loanable funds changes, What will happen?
A new equilibrium is achieved.
When consumers change their behavior and decide to save more which curve shifts which way?
A shift in supply of loanable funds to the right.
What happens when the Supply of Loanable Funds increases
The equilibrium interest rate is going to fall & Quantity of Funds is going to increase
What causes shifts in the Supply of Loanable Funds?
Consumers Changing their behavior and save more,
Foreigners decides to invest,
More savings due to more incentives
Increase in income
Suppose the interest you earned from making a loan was taxed at a lower rate previously, What will happen to the Supply Curve?
It will draw greater supply of loanable funds
More income means?
More spending and more savings as well.
What will happen if there is a decrease in Supply of Loanable funds?
The Curve will shift to the left
What causes the shift in the Demand for Loanable Funds?
Interest Rate,
Expected future sales increase,
New technologies/equipment,
Government borrowing increases (Crowding out)
What happens if there is an increase in Demands for Loanable funds?
The Equilibrium Interest Rate rises & Quantity of Loanable Funds increases.
When a government runs a budget deficit and, as a result, causes a decrease in private investment spending. This is called?
Crowding Out
Increasing tax. If the government increases tax on the private sector, e.g. higher income tax, higher corporation tax, then this will____
Reduce the income of consumers and firms. Increasing tax on consumers will lead to lower consumer spending.
