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Answer:
1. Economic conditions deteriorate, prompting households to save a larger portion of their income. SUPPLY will INCREASE.
Loanable funds are created by financial institutions from the savings that households deposit in them. If households start saving more, the amount of loanable funds created will be more which means an increase in supply.
2. In an effort to balance the budget, the government increases taxes paid by businesses. DEMAND will DECREASE.
Businesses comprise a large portion of the market demanding loanable funds. If their taxes increase, they will reduce the loanable funds they get which they use for investment because they will not see the need of investing more if their profitability will suffer from taxation.
3. Economic conditions improve, increasing the demand for goods and services. DEMAND will INCREASE.
With goods and services in high demand, businesses will seek more loanable funds to expand their capacity and produce more goods and services.
4. Innovations in robotics technology vastly improves productivity within manufacturing firms. DEMAND will INCREASE.
Demand for loanable funds will increase as businesses invest in the innovations to take advantage of the improved productivity offered by them.
The impact of the demand and supply in the given situations would be as follows:
1). Increase in Supply
2). Decrease in Demand
3). Increase in Demand
4). Increase in Demand
Demand and Supply
Demand and Supply are affected by various factors including price, income, and many others.
The fall in the economic conditions and people promoting savings would cause an increase in supply because the demand would decrease due to emphasis on savings.
The increased taxation would cause the purchasing power of the people to fall and thus, the demand would decrease.
The improvement in economic conditions implies more purchasing powers and hence, the demand will increase.
The enhanced productivity increases employment and hence, more will be demanded.
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