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A technological advance leads to a shift in: The government engages in more deficit spending....

Question:

A technological advance leads to a shift in:

The government engages in more deficit spending. Ceteris paribus (all else equal), this would cause:

a. both the demand and supply of loanable funds to decrease.

b. the demand for loanable funds to increase.

c. both the demand and supply of loanable funds to increase.

d. economic institutions to collapse.

e. the supply of loanable funds to increase.

a. neither short-run nor long-run aggregate supply.

b. only short-run aggregate supply.

c. both short-run and long-run aggregate supply.

d. only aggregate demand.

e. only long-run aggregate supply.

The aggregate demand curve slopes downward because:

According to the Solow growth theory, developing nations will catch up to the developed nations:

a. if developing nations invest in more education for their workers.

b. because developing nations can borrow technologies from the developed nations and learn from their mistakes.

c. at no foreseeable time in the future.

d. if developing nations become more politically stable.

e. in about 100 years.

a. a higher price level will increase purchasing power.

b. a higher price level will increase exports.

c. a higher price level reduces wealth.

d. all demand curves slope downward.

e. as price rises, consumers substitute cheaper goods for more expensive goods.

The Loanable Funds Market:

The loanable funds market revolves around borrowers and lenders in the market. The wedge term in the market is the rate of interest. Savings are sold and bought on the loanable funds market instead of goods and services.

Answer and Explanation:

1. The government engages in more deficit spending. Ceteris paribus (all else equal), this would cause: b. demand for loanable funds to increase.

When the government enters the loanable funds market, the demand for funds increases.

2. A technological advance leads to a shift in: c. both short-run and long-run aggregate supply.

When there is a technological advancement, the production capacity increases and more outputs are produced with the same number of inputs.

3. The aggregate demand curve slopes downward because: c. higher price levels reduce wealth.

There is an inverse relation between the price level and the amount of wealth.

4. According to the Solow growth theory, developing nations will catch up to the developed nations: b. because developing nations can borrow technologies from the developed nations and learn from their mistakes.

This is known as the theory of convergence, where the developing nations learn from the mistakes of the developed nations and grow their economies accordingly.


Learn more about this topic:

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Loanable Funds: Definition & Theory

from Introduction to Business: Homework Help Resource

Chapter 25 / Lesson 29
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