Identify the impact on either the supply or demand of loanable funds following the events listed below. Economic conditions deteriorate, prompting households to save a larger portion of their income. will In an effort to balance the budget, the government increases taxes paid by businesses. will Economic conditions improve, increasing the demand for goods and services. will Innovations in robotics technology vastly improves productivity within manufacturing firms. will

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.

c

explanation: