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Assume The Canadian Loanable Funds Market. Part A: Assume all Canadian househol...

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Assume The Canadian Loanable Funds Market.

Part A: Assume all Canadian household expect a future raise in income of 25%.

and

Part B: Assume the Canadian Federal Government has decreased their deficit.

1. Assume Part A: The Demand for Loanable Funds will _________________(Increase/Decrease/Unchanged).

2. Assume Part A: Given your answer in Question 1 above, the Demand Curve will shift _______________ (Left/Unchanged).

3. Assume Part A: The Supply Curve will __________________. (Increase/Decrease/Unchanged).

4. Assume Part A : Given your answer in Question 3 above, the Supply Curve will shift to the __________(Left/Unchanged).

5. Assume Part A: Will the shift or shifts of the curves above create a _______________(Shortage/Surplus) of loanable funds.

6. Assume Part A: Given your answer in Question 5 above, will the real interest rate ______________(Increase/Decrease/Unchanged).

7. Assume Part A: Given your answer in Question 6 above, investment will ____________(Increase/Decrease/Unchanged).

8. Assume Part A: Given your answer in Question 6 above, private savings will ___________(Increase/Decrease/Unchanged).

9. Assume Part A: At the new equilibrium real interest rate will the equilibrium quantity of loanable funds ______________(Increase/Decrease/or be Unchanged) compared to the original equilibrium quantity.

10. Assume Part A: Should the theory of Ricardo-Barro effect be applied to this results of the events in Part A? (Yes/No)

11. Assume Part B: The Demand for Loanable Funds will _________________(Increase/Decrease/Unchanged).

12. Assume Part B: Given your answer in Question 11 above, the Demand Curve will shift _______________ (Right/Left/Unchanged).

13. Assume Part B: The Supply Curve will __________________ (Increase/Decrease/Unchanged).

14. Assume Part B: Given your answer in Question 13 above, the Supply Curve will shift to the __________(Left/Right/Unchanged)

15. Assume Part B: Will the shift or shifts of the curves above create a _______________(Shortage/Surplus) of loanable funds.

16. Assume Part B: Given your answer in Question 15 above, will the real interest rate _______________________________ (Increase/Decrease/Unchanged).

17. Assume Part B: Given your answer in Question 16 above, investment will ____________(Increase/Decrease/Unchanged).

18. Assume Part B: Given your answer in Question 16 above, private savings will ___________(Increase/Decrease/Unchanged).

19. Assume Part B: At the new equilibrium real interest rate will the equilibrium quantity of loanable funds ______________(Increase/Decrease/or be Unchanged) compared to the original equilibrium quantity.

20. Assume Part B: Should the theory of Ricardo-Barro Effect only be applied if government spending crowds out investment? (Yes/No)

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