Answered: In October 1987 stock prices fell 22…

In October 1987 stock prices fell 22 percent in one day and bonds rate fell also. Use the loanable funds theory to explain what happen.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance

Section: Chapter Questions

Problem 2QFR

See similar textbooks

Related questions

Q: The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. Which…

A: Loanable Funds is defined as the sum total of the money owned by the people and entities in an…

Q: Which of the following is considered to be loanable funds from financial institutions? CEA

A: The loanable funds concept is a theory of market interest rates in the field of economics. With this…

Q: Name and explain on the example of your interest one factor that caused the shift of the supply for…

A: Introduction Supply curve in loanable market shows the behavior of savers. When interest rate are…

Q: Which of the following was an underlying cause of the economic crisis of 2008? a. The imposition of…

A: Conventional lending standards had started to erode since the 1990s.

Q: In the Loanable Funds Market Model, ceteris paribus, it typically follows that when the federal…

A: Government when runs a deficit budget that means it is incurring excess of expenditure over its…

Q: According to the textbook, what entities are the main suppliers of funds to the loanable funds…

A: In the loanable market, people interact with each other to exchange loanable funds in terms of…

Q: Q2. A robust financial market is one of the pillars of stable economic growth and financial…

A: Financial market: It is a market form where the buyers and sellers indulge in trading of assets or…

Q: How does the financial system coordinate saving and investment?

A: By using the loanable fund as a tool, the financial system coordinates saving and investment in the…

Q: list the factors that affect the demand side of the loanable funds market. which factors shift the…

A: The demand for loanable funds is based on borrowings. There are several factors that can affect the…

Q: Using the loanable fund model (financial market) presented in chapter 3, suggest using a graph at…

A: The funds that are available for lending out to the borrowers in an economy are referred to as…

Q: Draw a correctly labeled graph showing equilibrium in the loanable funds market

Q: He 1ollswing graph to show the effects on the Market for Loanable Funds of businesses discovering…

A: Answer: Introduction: Demand for loanable funds: the loanable funds are demanded by investors such…

Q: If the zero lower bound binds on a loanable funds graphs, then there is excess A. saving B. bank…

A: The total amount of money that persons and corporations in an economy have decided to save and lend…

Q: What factors make up the total demand for loanable funds? The total supply of loanable funds. Please…

A: As economies emerged, goods and services were produced that required machinery and labour. With time…

Q: The stock market during 1998 and the first half of 1999 showed substantial strength. If the strong…

A: Meaning of Financial Assets: The term financial assets refer to the situation, under which these…

Q: What impact will a decrease in investor confidence have on the Market for Loanable Funds? A)…

A: The market where there is occurence of borrowing and lending of loanable funds is called the market…

Q: Along with the onset of the pandemic, capital inflows to Monotreme declined. Analyze the impact of…

A: Capital inflow: It refers to the increase in the inflow of capital in the economy. The increase in…

Q: When the expected profit investment demand and the demand for loanable funds curve shifts A. rises;…

A: Profit: It means gain after subtracting all the expenses from the total amount received.

Q: Which of the following is a benefit of using financial investment to raise financial capital? there…

A: In a market, when a firm wants to raise funds or capital to make investment in the business, it has…

Q: purpose and contents of "Financial Markets" is : Group of answer choices about what a basic…

A: A financial market refers to the form of market in which people trade financial assets and…

Q: A well-functioning financial system does all of these EXCEPT: a. foster economic growth by…

A: The objective of the financial system is to manage the availability of funds in the market. This not…

Q: Imagine that you wish to launch a start-up online business. You do not have enough capital…

A: Islamic banks are based on Islamic laws which imply principles of Islamic finance and banking have…

Q: Which of the following could explain an increase in the equilibrium interest rate and a decrease in…

A: Market for loanable funds shows demand and supply for loanable funds and equilibrium in the market…

Q: In the loanable funds market, if firms become more optimistic about future profitability, then the…

A: Loanable funds refers to the amount which is used in the activity of borrowing and lending it to the…

Q: Choose the best answer in the brackets 1) According to the loanable funds theory, a decrease in…

A: In the classical model, the loanable funds market determines the equilibrium interest rate and the…

Q: If there is a surplus of loanable funds, then

A: When there is any excess supply of anything above the demand then it will cause surplus. Note:-…

Q: What must have happened in the loanable funds market to produce the 2020 level of interest rates…

A: Demand curve for the loanable fund shows the level of demand for loan at different interest rate.…

Q: Pick South America - Northern Africa. Does this country also experience similar or different changes…

A: Effect of COVID-19 on the North African County The COVID-19 flare-up is influencing the private…

Q: What is demand for Loanable Funds and what are the fields where from these Demand for Loanable funds…

A: Loanable funds include the forms of credit like loans, saving deposits, bonds, etc. The loanable…

Q: Over the past few years, quite a number of private loan companies have been established globally.…

A: The supply of the loanable funds depends on the behavior of all the savers in the economy. The…

Q: What is importance of financial markets for the productive capacity of the economy?

A: The economies work with the motive of increasing, or enhancing their overall economic growth, and…

Q: Why emerging market economies is important in financial markets?

A: A financial market is considered as the market in which different people trade in financial…

Q: Explain the loanable funds theory of interest rates.

A: Loanable funds is all the money in the economy that people decides to save and lend which bridges…

Q: For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain!…

A: Hello, thank you for the question. Since there are multiple questions asked here, only the first…

Q: What happen to the demand in market of loanable funds when NCO>0 and NCO<0?

A: NCO stands for Net capital outflow. If the NCO>0, then it means that there is more amount of…

Q: If and when the demand of loanable funds shifts to the left:

A: The market for Loanable Funds defines how the borrowing and lending activities take place in the…

Q: For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain!…

A: Bonds are defined as the fixed income securities issued by the private companies and government…

Q: Explain the loanable funds theory

A: The economics as a study is based upon the idea that the resources which are present with the…

Q: Investment is a source of supply of loanable funds Select one: True False

A: The loanable funds market determines interest rates in the market by investments and savings. One of…

Q: Using the accompanying diagram, explain what will happen to the market for loanable funds when there…

A: Loanable Funds Market is the one where where the activity of borrowing takes place. Here, savers…

Question

In October 1987 stock prices fell 22 percent in one day and bonds rate fell also. Use the loanable funds theory to explain what happen.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Explain the loanable funds theory
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.
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.
The table below shows Demand and Supply for loanable fund at given time. Real interest rate Quantity of loanable fund demanded (billion $) Quantity of loanable fund supplied (billion $) 0.01 1000 400 0.02 950 450 0.03 900 500 0.04 850 550 0.05 800 600 0.06 750 650 0.07 700 700 0.08 650 750 0.09 600 800 0.10 550 850 0.11 500 900 0.12 450 950 0.13 400 1000 0.14 350 1050 0.15 300 1100 Instructions: Using excel, find the equilibrium real interest rate and quantity of loanable fund. show the equilibrium on a graph. If this country experiences a recession business cycle phase that decreases the demand for loanable fund by $200 billion. Find the new equilibrium real interest rate and quantity of loanable fund. Show the shift on the graph. list Two factors that shift SLF rightward and two factors that shift DLF rightward What is the meaning of crowding out?…
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?
Economists assert that financial markets serve the function of efficiently allocating capital. What is meant by the function? Explain and include an example.
If and when the demand of loanable funds shifts to the left:
The stock market during 1998 and the first half of 1999 showed substantial strength. If the strong returns are expected to continue, how would this affect the supply of loanable funds?
What must have happened in the loanable funds market to produce the 2020 level of interest rates what caused this change?
When the expected profit ________, investment demand ________ and the demand for loanable funds curve shifts ________.
Pick South America - Northern Africa. Does this country also experience similar or different changes in savings during the pandemic? Discuss the impacts and illustrate with a loanable fund market diagram.
What impact does the government have in the loanable funds market? Forces that change the demand for investment in turn impact the demand for loanable funds. These forces include the change of government policies