# General Instructions for all Assignments 1. Unless specified differently by your

##### Swamped with your writing assignments? Take the weight off your shoulder!

General Instructions for all Assignments
1. Unless specified differently by your course instructor, save this assignment template to your computer with the following file naming format:
Course number_section number_Last name_First name_Unit number.
Example: BU204_Section02_David_Alex_Unit1
2. At the top of the template, insert: Your Name, Course Number and Section (BU204 – Section 0x), and the Date.
3. Insert your answers below each question or in the appropriate space provided for in the question. Respond to questions in a thorough manner, providing specific examples of concepts, topics, definitions, and other elements asked for in the questions.
b. include a list of references at the bottom of your last page,
c. be in Standard English with correct spelling, punctuation, grammar, and style,
d. be double-spaced,
e. be formatted in Times New Roman,12-point, black font, and
f. respond to questions in a thorough manner, providing specific examples of concepts, topics, definitions, and other elements asked for in the questions.
5. Upload the completed assignment to the appropriate unit Dropbox.
Assignment
This assignment addresses how the loanable funds market matches savers with borrowers and the impact of various market pressures on interest rates and money availability.
1. Explain how overall national savings relates to overall investment and why savings is always equal to investment.
(Enter response here.)
2. The following formulas are very important in macroeconomics:
1) Y = C + I + G + EX – IM
2) S = (Y – T – C) + (T – G)
a. Identify the components of each formula.
(Enter response here.)
b. Explain the relationship between the two formulas.
(Enter response here.)
3. Explain how changes in interest rates will affect the amount of money that people save.
(Enter response here.)
4. Explain how changes in interest rates and rates of return on various investment options will affect the amount of money that businesses are willing to invest to increase output.
(Enter response here.)
5. Explain how government tax revenue and government spending create either a budget surplus or budget deficit. How does that difference affect the market for loanable funds?
(Enter response here.)
6. Use the market for loanable funds shown in the accompanying diagram to answer the following questions for each of the three scenarios: What will the likely results be on: 1) quantity of money saved, 2) interest rates, and 3) additional business investment. For all scenarios, assume that there are no external controls on interest rates.

Descriiption: A graph showing the supply, in a red straight line rising to the right, and demand, in a straight blue line descending to the right, for loanable funds with the market interest rates on the vertical axis and money available on the horizontal axis. Initial equilibrium is at 8% interest rate and 300 million dollars.
a. The government significantly increases its borrowing to fund its growing deficit.
(Enter response here.)
b. At any given interest rate, a significant number of middle-class consumers decide to use their credit cards to fund additional purchases. Assume no change in government borrowing.
(Enter response here.)
c. At any given interest rate, many major businesses become pessimistic about the future profitability of investment spending. Assume no change in government borrowing.
(Enter response here.)
———————-
References:
Author. (Date.) Title. Source.