The following graph shows the market for loanable funds.On the graph, show the effects of an increase in the prices of food and other products of agriculture on the market for loanable funds.SupplyDemandSupplyDemandQUANTITY OF LOANABLE FUNDSThe equilibrium interest rateas a result of an increase in the price of agricultural output.INTEREST RATE (Percent)

In the classical macroeconomic theory, the loanable funds market determines the equilibrium interest…

The following graph shows the market for loanable funds. On the graph, show the effects of an increase in the prices of food and other products of agriculture the market for loanable funds. Supply Demand Supply Demand QUANTITY OF LOANABLE FUNDS The equilibrium interest rate as a result of an increase in the price of agricultural output. INTEREST RATE (Percent)

The following graph shows the market for loanable funds. On the graph, show the effects of an increase in the prices of food and other products of agriculture the market for loanable funds. Supply Demand Supply Demand QUANTITY OF LOANABLE FUNDS The equilibrium interest rate as a result of an increase in the price of agricultural output. INTEREST RATE (Percent)

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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Similar questions

Use the loanable funds market to illustrate the effect of the following events on the equilibrium. Illustrate the effects on the interest rate and quantity of investment-savings a) The proportion of retired people in the population goes up. Think that usually retired people generally save less than working people at any interest rate. b) At any given interest rate, consumers decide to save more (assume the budget balance is zero). c) At any given interest rate, businesses become very optimistic about the future profitability of investment spending (assume the budget balance is zero).
The graph characterizes a market for loanable funds. Shift the appropriate curves to indicate what will happen to the market if the government grants a new corporate tax credit for business investment. (Look at image) After this change, the real interest rate decreases and the quantity of loanable funds increases. the real interest rate decreases and the quantity of loanable funds decreases. the real interest rate increases and the quantity of loanable funds decreases. the real interest rate increases and the quantity of loanable funds increases.
How would the interest rate change as a result of the following?a. A rise in the demand for consumption loans _____________________________________________________________________________b. A decline in the supply of loanable funds ________________________________________________________________________________c. A rise in the demand for investment loans_______________________________________________________________________________
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. (Graph in image) (a. Saving, b. Investment) is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied (a. increases, b. decreases). Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is (a. greater, b. less) than the quantity of loans demanded, resulting in a (a. surplus, b. shortage) of loanable funds. This would encourage lenders to (a. raise, b. lower) the interest rates they charge, thereby (a. increasing, b. decreasing) the quantity of loanable funds supplied and (a. increasing, b. decreasing) the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of ____ %.
If there is a surplus of loanable funds, the quantity demanded is A. less than the quantity supplied and the interest rate will rise. B. less than the quantity supplied and the interest rate will fall. C. greater than the quantity supplied and the interest rate will fall. D. greater than the quantity supplied and the interest rate will rise.
Suppose there are two types of investment in the economy: business fixed investment and residential investment. Suppose that loanable fund market is in equilibrium and the government grants an investment tax credit only for business investment. How does this policy affect the supply and demand for loanable funds, the equilibrium interest rate and equilibrium quantity of loanable funds? Use graph to explain your answer.
Show the effect on the real interest rate and equilibrium quantity of loanable funds of a decrease in the demand for loanable funds and a smaller decrease in the supply of loanable funds. Draw a demand for loanable funds curve. Label it DLF0. Draw a supply of loanable funds curve. Label it SLF0. Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF1. Draw a curve that shows a smaller decrease in the supply of loanable funds. Label it SLF1. Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2.
(10 pts) Describe how the following statements affect either the supply or the demand for loanable funds. For each statement below, do the following: Explain whether the event affects either the demand or the supply of loanable funds. Describe how the statement will affect the equilibrium interest rate and quantity of loanable funds. Draw a graph to demonstrate each answer. Please remember to label each part of the graph. Indicate the change in the interest rate and the quantity of loanable funds on your graph. Analyze each event independently. (Hint: Review the slides and recordings of Lecture 4 for similar graphical analysis). Statements: “The national-level saving rate is important from a macroeconomic perspective, in the sense that higher savings tend to strengthen the economy over the long run.” “Slow-trend growth is reducing the opportunities for profitable long-term investments. The recent downturn in business investment was less of a cyclical blip than a sign of…
In the graph you've just made, what happens if the real interest rate is 4 percent per year? A. The real interest rate rises to 8 percent per year, where there is a surplus of loanable funds. B. The real interest rate fluctuates between 4 and 8 percent per year. C. The real interest rate remains at 4 percent per year. D. There is a shortage of loanable funds and the real interest rate rises to 6 percent per year. Use screenshot attached below to answer the question thanks!
Draw a correctly labeled graph of the loanable funds market showing the equilibrium real interest rate and the equilibrium quantity of 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. NOTE: the options for the first dropdown question is (investment or saving), the options for the second dropdown question is (decreases or increases), the options for the third dropdown question is (greater or less), the options for the fourth dropdown question is (surplus or shortage), the options for the fifth dropdown question is (raise or lower), the options for the sixth dropdown question is (increasing or drecreasing), and the options for the seventh dropdown question is also (increasing or decreasing)
Three student have each saved $1,000. Each has an investment opportunity in which he or she can invest up to $2,000. Here are the rates of return on the students' investment projects: Harry 5 percent Ron 8 percent Hermione 20 percent Now suppose the school opens up a market for loanable funds in which students can borrow and lend among themselves at an interest rate r. What would determine whether a student would choose to be a borrower or lender in this market?