Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Question
Chapter 4, Problem 2IP
(a)
To determine
Effect of low interest rate on house price.
(b)
To determine
The Effect of the increased mortgage rate on house price.
(c)
To determine
Effects of increasing demand for housing on house price in San Francisco.
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Students have asked these similar questions
Discuss clearly how the following items may affects the change in demand.
Population change
Prices of related goods
Expected future prices, income, and credit
Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers.
The number of people at the most common ages for home-buying increases.
People gain confidence that the economy is growing and that their jobs are secure.
Banks that have made home loans find that a larger number of people than they expected are not repaying those loans.
Because of a threat of a war, people become uncertain about their economic future
The overall level of saving in the economy diminishes.
The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.
4. Supply and demand for loanable funds
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.
INTEREST RATE (Percent)
6
5
4
32
1
0
0
100
Supply
200
300
400
LOANABLE FUNDS (Billions of dollars)
Demand
500
600
4
Chapter 4 Solutions
Microeconomics
Ch. 4.1 - Prob. 1QCh. 4.1 - Prob. 2QCh. 4.1 - Prob. 3QCh. 4.1 - Prob. 4QCh. 4.1 - Prob. 5QCh. 4.1 - Prob. 6QCh. 4.1 - Prob. 7QCh. 4.1 - Prob. 8QCh. 4.1 - Prob. 9QCh. 4.1 - Prob. 10Q
Ch. 4 - Prob. 1QECh. 4 - Prob. 2QECh. 4 - Prob. 3QECh. 4 - Prob. 4QECh. 4 - Prob. 5QECh. 4 - Prob. 6QECh. 4 - Prob. 7QECh. 4 - Prob. 8QECh. 4 - Prob. 9QECh. 4 - Prob. 10QECh. 4 - Prob. 11QECh. 4 - Prob. 12QECh. 4 - Prob. 13QECh. 4 - Prob. 14QECh. 4 - Prob. 15QECh. 4 - Prob. 16QECh. 4 - Prob. 17QECh. 4 - Prob. 18QECh. 4 - Prob. 19QECh. 4 - Prob. 20QECh. 4 - Prob. 21QECh. 4 - Prob. 22QECh. 4 - Prob. 23QECh. 4 - Prob. 24QECh. 4 - Prob. 1QAPCh. 4 - Prob. 2QAPCh. 4 - Prob. 3QAPCh. 4 - Prob. 4QAPCh. 4 - Prob. 5QAPCh. 4 - Prob. 6QAPCh. 4 - Prob. 1IPCh. 4 - Prob. 2IPCh. 4 - Prob. 3IPCh. 4 - Prob. 4IPCh. 4 - Prob. 5IP
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- Predict how each of the following economic changes will affect the financial market for home loans. (It may help to use a demand and supply diagram to conduct your analysis.) Banks that have made home loans find that a larger number of people than they expected are not repaying those loans. Which curve will shift: supply or demand? In which direction will the curve shift: right or left? Briefly explain why this scenario caused this curve shift. What will happen to equilibrium price? What will happen to equilibrium quantity?arrow_forwardis the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied than the quantity of loans the interest rates they charge, thereby the quantity of loanable funds demanded, moving the market toward Suppose the interest rate is 5.5%. Based on the previous graph, the quantity of loanable funds supplied is demanded, resulting in a of loanable funds. This would encourage lenders to the quantity of loanable funds supplied and the equilibrium interest rate ofarrow_forward“A reading of consumer sentiment rose in February to its highest level in three months on an improving stock market and hopes for continued job gains, according to data released Friday morning.” (Market Watch, March 1, 2013). The quote copied above refers to the income expectations of consumers in United States. Determine the effects this situation implies for the market for used books if they are considered inferior goods. That is, starting from an equilibrium situation, explain and graph the changes in the equilibrium in the market for used books. More specifically, what curve (side of the market) is affected and to what direction, and Side of the market: ___________________ Direction: __________________________ what is the change in both the equilibrium price and the equilibrium quantity. Change in equilibrium price: ________________________ Change in equilibrium quantity: ______________________ Make sure you graph the changes in the market for both price and…arrow_forward
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