The graph below represents the market for loanable funds for an economy, Use the graph to answer the following questions, veal teret vate St000 loanable fund $ Assume there currently is a surplus in the market for loanable funds. The current real interest rate is 1 Select) the equilibrium real interest rate. As the market moves to the equilibrium real interest rate we expect ( Select Demand for loanable funds comes from the activities of ISelect)

The graph below represents the market for loanable funds for an economy, Use the graph to answer the following questions, veal teret vate St000 loanable fund $ Assume there currently is a surplus in the market for loanable funds. The current real interest rate is 1 Select) the equilibrium real interest rate. As the market moves to the equilibrium real interest rate we expect ( Select Demand for loanable funds comes from the activities of ISelect)

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Savings,investment And The Financial System

Section: Chapter Questions

Problem 5PA

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Use the graph to answer the question that follows. Quantity of Loanable Funds (S) Assume that the loanable funds market is in equilibrium, as shown in the graph.If households become concerned about retirement income and spend less,what will happen in this market for loanable funds? O The demand for funds will increase, as will the equilibrium interest rate. O Both the demand for funds and the supply of funds will decrease, with an indeterminate impact on the equilibrium interest rate. ) The demand for funds will decrease, and the equilibrium quantity of funds transacted will erease below Fo. O Both the demand for funds and the supply of funds will icrease, with an increase in the quantity of funds transacted. O The supply of funds will increase, and the equilibrium interest rate wi fall blow ro. Real Interest Rate
16 A borrower cannot become a saver if the rate of interest decreases, but might become a saver if the rate of interest increases. Is this true or false? Carefully explain your answer (which must prove or disprove each part of the statement) using any appropriate diagrams.
Three students have each saved $1,000. Each has an investment opportunity in which he or she can invest up to $2,000. Here are the rates of return on the students' investment projects: Student Alex Clancy Eileen Return (Percent) 4 7 Student Alex Clancy Eileen 15 Assume borrowing and lending is prohibited, so each student uses only personal saving to finance his or her own investment project. Complete the following table with how much each student will have a year later when the project pays its return. Money a Year Later (Dollars) Now suppose their school opens up a market for loanable funds in which students can borrow and lend among themselves at an interest rate r. A student would choose to be a lender in this market if his or her expected rate of return is than r.
The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. 10 Supply 8 Demand 100 200 300 400 500 600 700 800 900 1000 LOANABLE FUNDS (Billions of dollars) is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied increases v Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is v than the quantity of loans demanded, resulting in a v of loanable funds. This would encourage lenders to v the interest rates they charge, thereby v the quantity of loanable funds supplied and v the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of 5% . INTEREST RATE (Percent)
Real interest rate (percent per year] SLF1 SLFO SLF2 Loanable funds (trillions of 2009 dollars) In the above figure, the economy is at point a on the initial supply of loanable funds curve SLFO. What happens if the real interest rate rises? Nothing; the economy would remain at point a. There would be a movement to a point such as b on supply of loanable funds curve SLFO. O The supply of loanable funds curve would shift rightward to a curve such as SLF2. The supply of loanable funds curve would shift leftward to a curve such as SLF1.
Use the graph to answer the question that follows. Real interest rate % r Dif q q' Quantity of loanable funds $ The graph shows a change in an economy after the government's decision to provide tax benefits to businesses in an effort to increase investment. What is the new point of equilibrium in the economy's loanable funds market? O o Or O o O q Or o' Sif D'If
Suppose the government borrows $20 million more next year than this year. a. Draw and fully label a diagram to illustrate the market for loanable fund to analyze this policy. How does the elasticity of the supply of loanable funds affect the size of these changes? How does the elasticity of the demand of loanable funds affect the size of these changes?
K Consider the graph to answer the following questions: a. The shift from S, to S₂ represents in the supply of loanable funds. b. With the shift in supply, the equilibrium quantity of loanable funds c. With the change in the equilibrium quantity of loanable funds, the quantity of saving and the quantity of investment ▼ A CI Real Interest Rate Market for Loanable Funds L₂ L1 Loanable Funds ($ per year) S₁ Q
This figure shows the loanable funds market for a closed economy. INTEREST RATE (Percent) 09 2 E с 50 100 150 LOANABLE FUNDS (Dollars) D₂ o Refer to Figure 26-4. Starting at point A, the enactment of an investment tax credit would likely cause the quantity of loanable funds traded to increase to $150 and the interest rate to rise to 6% (point C). decrease to $50 and the interest rate to fall to 2% (point B). decrease to $50 and the interest rate to rise to 6% (point E). increase to $150 and the interest rate to fall to 2% (point D).