In detail what are some of the factors that affect demand for loanable funds according to the loanable funds theory of interest rate determination and what impact would these have on the demand and supply of funds and on the interest rate

In detail what are some of the factors that affect demand for loanable funds according to the loanable funds theory of interest rate determination and what impact would these have on the demand and supply of funds and on the interest rate

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 6P

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Provide two examples of changes in the market for loanable funds that can result in a change in the level of interest rates. Explain how and why the interest rate changes based on the loanable fund theory.
What factors make up the total demand for loanable funds? The total supply of loanable funds. Please list and define each of these demand and supply factors in the Loanable Funds Theory of Interest.
QUESTION ONE Using the loanable funds theory, illustrate the effect of the following changes on the level of interest rates: Decrease in demand for loanable funds. Decrease in the supply of loanable funds.
Graphically Show each scenario of the market for loanable funds and graph the supply and demand for each of the 4 scenarios. Draw the shift occurring (Supply or Demand) and explain what happens to the equilibrium interest rate in for each of the 4 scenarios 1. A breakthrough in medical technology results in many hospitals wanting to buy new equipment. 2. The government budget deficit is reduced by 50%. 3. Foreign investors buy residential property in the United States. 4. People around the world are worried about financial stability in their countries and choose to move their wealth to U.S. financial markets.
The Loanable Funds Theory suggests that the market interest rate is determined by the factors that control supply of and demand for loanable funds. Discuss the factors that affect interest rates.
What is the effect of a fall in the real interest rate on the demand for loanable funds? A fall in the real interest rate _______. A. increases the quantity of loanable funds demanded down along the demand curve B. decreases the quantity of loanable funds demanded up along the demand curve C. decreases the demand for loanable funds and shifts the demand curve leftward D. increases the demand for loanable funds and shifts the demand curve rightward
Textbook: Macroeconomics by P. Krugman & R. Wells (5th Edition) Using the accompanying diagram, explain what will happen to the market for loanable funds when there is a fall of percentage points in the expected future inflation rate. How will the change in the expected future inflation rate affect the equilibrium quantity of loanable funds?