Author Question: What are the factors that change the supply of saving and shift the supply of loanable funds curve? ... (Read 111 times)

Capo · **on:** Jun 29, 2018

What are the factors that change the supply of saving and shift the supply of loanable funds curve?

What will be an ideal response?

Question 2

The consumer price index (CPI)

A) compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period 2.
B) compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period.
C) measures the increase in the prices of the goods included in GDP.
D) is the ratio of the average price of a typical basket of goods to the cost of producing those goods.

Ptupou85 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

There are three main factors that influence saving: disposable income, wealth, expected future disposable income, and default risk. The higher disposable income, the more people save, so an increase in disposable income shifts the supply of loanable funds curve rightward. The higher people's wealth, the less they save because they feel richer and do not see the need to save. Thus an increase wealth shifts the supply of loanable funds curve leftward. The higher the expected future disposable income, the less people save today. Thus an increase in the expected future disposable income shifts the supply of loanable funds curve leftward. Finally the higher the default risk, the less people save and so the supply of loanable funds curve shifts leftward.

Answer to Question 2

B