Principles of Macroeconomics :3

1. 26 Saving, Investment, and the Financial System

29. Figure 1 The Market for Loanable Funds Loanable Funds (in billions of dollars) 0 Interest Rate Copyright©2004 South-Western Supply Demand 5% $1,200

33. Figure 2 An Increase in the Supply of Loanable Funds Loanable Funds (in billions of dollars) 0 Interest Rate Copyright©2004 South-Western Supply, S 1 S 2 2. . . . which reduces the equilibrium interest rat e . . . 3. . . . and raises the equilibrium quantity of loanable funds. Demand 1. Tax incentives for saving increase the supply of loanable fund s . . . 5% $1,200 4% $1,600

37. Figure 3 An Increase in the Demand for Loanable Funds Loanable Funds (in billions of dollars) 0 Interest Rate Copyright©2004 South-Western 1. An investment tax credit increases the demand for loanable fund s . . . 2. . . . which raises the equilibrium interest rate . . . 3. . . . and raises the equilibrium quantity of loanable funds. Supply Demand, D 1 D 2 5% $1,200 6% $1,400

41. Figure 4: The Effect of a Government Budget Deficit Loanable Funds (in billions of dollars) 0 Interest Rate Copyright©2004 South-Western 3. . . . and reduces the equilibrium quantity of loanable funds. S 2 2. . . . which raises the equilibrium interest rat e . . . Supply, S 1 Demand $1,200 5% $800 6% 1. A budget deficit decreases the supply of loanable fund s . . .

44. Figure 5 The U.S. Government Debt Percent of GDP 1790 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990 2010 0 20 40 60 80 100 120 Copyright©2004 South-Western Revolutionary War Civil War World War I World War II