1. How will this change in consumer behavior likely effect the demand for loanable funds? 2. How will this change in the demand for loanable funds likely effect the interest rate in the short-run? 3. How will this change in the interest rate likely change the behavior of consumers in the long-run?

1. How will this change in consumer behavior likely effect the demand for loanable funds? 2. How will this change in the demand for loanable funds likely effect the interest rate in the short-run? 3. How will this change in the interest rate likely change the behavior of consumers in the long-run?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Savings,investment And The Financial System

Section: Chapter Questions

Problem 8PA

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Question

Scenario: Country X is currently in a contraction in the business cycle. After months of
contractions the economy enters a recession resulting in people delaying large purchases of
cars and homes.
1. How will this change in consumer behavior likely effect the demand for loanable funds?
2. How will this change in the demand for loanable funds likely effect the interest rate in
the short-run?
3. How will this change in the interest rate likely change the behavior of consumers in the
long-run?
4. How will this change in consumer behavior likely effect the business cycle in the long-
run? Explain your reasoning.

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