A Graphically Illustrate How an Increase in Income Affects the Equilibrium

question 13

Essay

a. Graphically illustrate how an increase in income affects the equilibrium levels of saving, investment, and the interest rate in the loanable funds model. Be sure to label:
i. the axes
ii. the curves
iii. the initial equilibrinm values
iv. the direction the curve shifts
v. the terminal equilibrium values.

b. Explain in words what happens to the equilibrium levels of saving, investment, and the interest rates as a result of the increase in income.

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Definitions:

Environmental Uncertainty

The degree of unpredictability and lack of information regarding changes in the external environment that affect an organization's operations.

Strategic Contingencies

Involves planning for and responding to events that could significantly impact an organization's ability to achieve its objectives.

Defensiveness

A psychological reaction that occurs in response to a perceived threat, characterized by a protective behavior aimed to defend oneself from criticism or harm.

Substitutability

The degree to which one product or service can be replaced with another to satisfy the same need or want.