(Investment or Saving) is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded (Increases or decreases) Suppose the interest rate is 3.5%. Based on the previous graph, the quantity of loanable funds supplied is _____ ( greater or less) than the quantity of loans demanded, resulting in a (Shortage or surplus) _____ of loanable funds. This would encourage lenders to (Lower or raise) the interest rates they charge, thereby (Decreasing or increasing) the quantity of loanable funds supplied and (Increasing or decreasing) the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of __ %. The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of I funds, and the downward-sloping blue line represents the demand for loanable funds. INTEREST RATE (Percent) 1 N 10 5 10 0 0 100 200 300 400 Supply Demand 500 600 LOANABLE FUNDS (Billions of dollars) (?)
(Investment or Saving) is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded (Increases or decreases) Suppose the interest rate is 3.5%. Based on the previous graph, the quantity of loanable funds supplied is _____ ( greater or less) than the quantity of loans demanded, resulting in a (Shortage or surplus) _____ of loanable funds. This would encourage lenders to (Lower or raise) the interest rates they charge, thereby (Decreasing or increasing) the quantity of loanable funds supplied and (Increasing or decreasing) the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of __ %. The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of I funds, and the downward-sloping blue line represents the demand for loanable funds. INTEREST RATE (Percent) 1 N 10 5 10 0 0 100 200 300 400 Supply Demand 500 600 LOANABLE FUNDS (Billions of dollars) (?)
Chapter21: Financial Markets, Saving, And Investment
Section: Chapter Questions
Problem 4P
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Transcribed Image Text:(Investment or Saving)
is the
source of the demand for loanable
funds. As the interest rate falls, the
quantity of loanable funds demanded
(Increases or decreases)
Suppose the interest rate is 3.5%.
Based on the previous graph, the
quantity of loanable funds supplied
is _____ ( greater or less) than the
quantity of loans demanded, resulting
in a (Shortage or surplus) _____ of
loanable funds. This would encourage
lenders to
(Lower or raise)
the interest rates they charge, thereby
(Decreasing or increasing)
the quantity of loanable funds supplied
and (Increasing or decreasing) the
quantity of loanable funds demanded,
moving the market toward the
equilibrium interest rate of __
%.
Transcribed Image Text:The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of I
funds, and the downward-sloping blue line represents the demand for loanable funds.
INTEREST RATE (Percent)
1
N
10
5
10
0
0
100
200
300
400
Supply
Demand
500
600
LOANABLE FUNDS (Billions of dollars)
(?)
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