2. According to the textbook, which of the following statements is (are) correct?(x) The price of loanable funds is the interest rate and the interest rate is determined by the forces of supply and demandin the loanable funds market.(y) The supply of loanable funds slopes upward because an increase in the interest rate provides an incentive for peopleto save more.(z) The demand for loanable funds slopes downward because a decrease in the interest rate provides an incentive forpeople to borrow more.A. (x), (y) and (z)B. (x) and (y) onlyC. (x) and (z) onlyD. (y) and (z) onlyE. (x) only4. Suppose a surplus of loanable funds exists at the present interest rate in the loanable funds market. Given the presenceof this disequilibrium,A. the supply of loanable funds will shift to the right and the demand will shift to the left.B. the supply of loanable funds will shift to the left and the demand will shift to the right.C. both the supply of loanable funds and the demand will shift to the right.D. neither curve shifts, but the quantity supplied will increase and the quantity demanded will decrease as the interestrate rises to equilibrium.E. neither curve shifts, but the quantity supplied will decrease and the quantity demanded will increase as the interest ratefalls to equilibrium.5. According to the textbook, which of the following statements about the loanable funds market is (are) correct?(x) When the supply of loanable funds shifts to the right then the equilibrium real interest rate decreases and theequilibrium quantity of loanable funds decreases.(y) When the demand for loanable funds shifts to the right then the equilibrium real interest rate increases and theequilibrium quantity of loanable funds increases.(z) If the demand for loanable funds shifts to the right and the supply of loanable funds shifts to the left, then the realinterest rate rises.A. (x), (y) and (z)B. (x) and (y) onlyC. (x) and (z) onlyD. (y) and (z) onlyE. (y) only

The market for loanable funds is a dynamic economic arena where borrowers and lenders converge to…

2. According to the textbook, which of the following statements is (are) correct? (x) The price of loanable funds is the interest rate and the interest rate is determined by the forces of supply and demand in the loanable funds market. (y) The supply of loanable funds slopes upward because an increase in the interest rate provides an incentive for people to save more. (z) The demand for loanable funds slopes downward because a decrease in the interest rate provides an incentive for people to borrow more. A. (x), (y) and (z) B. (x) and (y) only C. (x) and (z) only D. (y) and (z) only E. (x) only

2. According to the textbook, which of the following statements is (are) correct? (x) The price of loanable funds is the interest rate and the interest rate is determined by the forces of supply and demand in the loanable funds market. (y) The supply of loanable funds slopes upward because an increase in the interest rate provides an incentive for people to save more. (z) The demand for loanable funds slopes downward because a decrease in the interest rate provides an incentive for people to borrow more. A. (x), (y) and (z) B. (x) and (y) only C. (x) and (z) only D. (y) and (z) only E. (x) only

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 9P

See similar textbooks

Similar questions

1. In the model of the market for loanable funds, which of the following best describes why the supply curve is upward sloping? a The higher the interest rate, the more likely households are to spend b The higher the interest rate, the less likely firms are invest c The higher the interest rate, the more likely households are to borrow d The higher the interest rate, the more likely households are to save
In the loanable funds market, if firms become more optimistic about future profitability, then the a demand for loanable funds will increase, interest rates will increase, and private sector investment spending will increase. b demand for loanable funds will decrease, interest rates will decrease, and the equilibrium quantity of borrowing will decrease. c supply of loanable funds will increase, interest rates will decrease, and the equilibrium quantity of borrowing will increase. d supply of loanable funds will increase, interest rates will increase, and private sector investment spending will increase.
If and when the demand of loanable funds shifts to the left: Group of answer choices 1. This is good news for people who rely on the interest earnings from their savings but bad news for people who have outstanding home loans. 2. This is bad news for people who rely on the interest earnings from their savings but good news for people who have outstanding home loans. 3. This is good news both for people who rely on the interest earnings from their savings as well as those who have outstanding home loans. 4. This is bad news both for people who rely on the interest earnings from their savings as well as those who have outstanding home loans.
1. What happens to the quantity of loanable funds supplied when the interest rate rises? Explain why this change happens
#18. What would happen in the market for loanable funds if the government were to increase the tax on interest income? a The supply of loanable funds would shift right. b The demand for loanable funds would shift right. c The supply of loanable funds would shift left. d The demand for loanable funds would shift left.
1. Using the market for loanable fund diagram, show graphically and explain how the interest rate and investment are affected in each of the following cases. (Draw a separate diagram for each.)i. Tax on interest income decreases.ii. Government is running a budget surplus.iii. Investment tax credit falls.
1. Suppose the government borrows $20 million more next year than this year. a. How does the elasticity of the supply of loanable funds affect the size of thesechanges? b. How does the elasticity of the demand of loanable funds affect the size of thesechanges?
12. Suppose the interest rate decreases. Other things constant, how will the loanable funds market be affected? a. The demand for loanable funds curve will shift to the right. b. The demand for loanable funds curve will shift to the left. c. The quantity of loanable funds demanded will increase. d. The quantity of loanable funds supplied will increase. 13. Suppose a research lab fired a chemist, and then an environmental protection group hired the chemist at the same salary. What would be the net effect of these events on aggregate demand? a. The aggregate demand would shift rightward. b. The aggregate demand would shift leftward. c. The aggregate demand would become steeper. d. The aggregate demand would remain the same.
Qu Listen In which situation do you NOT contribute to the supply of loanable funds? a) You charge a vacation on a credit card. b) You pay off your mortgage. c) You open a new savings account. d) You make the final payment on your private student loan.
Table below shows total demand and supply of loanable funds (in RM billions) in an imaginary economy. Quantity demanded Interest rate of loanable funds Quantity supplied of loanable funds (percent) 85 4 72 80 6 73 75 8 75 70 10 77 65 12 79 60 14 81 A. Graph the market for loanable fund of this economy based on the data above and indicate the equilibrium quantity of loanable funds. B. Calculate the surplus or shortage at each level of interest rate. C. suppose the demand for loanable funds increases by RM 7 billion at each level of interest rate, indicate the effect of this changes on the equilibrium interest rate and quantity of loanable funds on your graph. |
Q: Draw a graph depicting the market for loanable funds and analyze the impact of open market operations when the interest rate is at or near the zero lower bound. a. Illustrate the supply and dem and for loanable funds, labeling the supply curve (S), the demand curve (D), and the initial equilibrium interest rate and quantity of loanable funds. b. Show the effect of open market operations on the supply of loanable funds, and analyze its impact on the price of loanable funds.c. Introduce a situation in which the market for loanable funds faces the zero lower bound (it may be easiest to draw a new graph for this for the purpose of clarity). d. Explain how open market operations typically influence the supply of loanable funds and interest rates in normal circumstances. e. Discuss why these operations become less effective when the interest rate is at or near the zero lower bound.
Suppose the government borrows $20 million more next year than this year. 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?