The following graph shows the supply of and demand for capital in a market over the last year. You can see that the demand for capital has increased over the last year (the demand curve shifted to the right). Place the black X at the equilibrium interest rate and the quantity of capital. INTEREST RATE. r (Percent) 20 18 18 14 12 2 0 D2 D1 2 4 6 8 10 12 14 CAPITAL (Billions of dollars) 16 18 20 O Weakened O Strengthened + Equilibrium The market interest rate increased by 2.0%, and the amount of capital borrowed Does it appear that the economy has strengthened or weakened over the past year? (?) by billion.

The following graph shows the supply of and demand for capital in a market over the last year. You can see that the demand for capital has increased over the last year (the demand curve shifted to the right). Place the black X at the equilibrium interest rate and the quantity of capital. INTEREST RATE. r (Percent) 20 18 18 14 12 2 0 D2 D1 2 4 6 8 10 12 14 CAPITAL (Billions of dollars) 16 18 20 O Weakened O Strengthened + Equilibrium The market interest rate increased by 2.0%, and the amount of capital borrowed Does it appear that the economy has strengthened or weakened over the past year? (?) by billion.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 38P: Suppose Ford Motor Company issues a five year bond with a face value of 5,000 that pays an annual...

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Suppose Ford Motor Company issues a five year bond with a face value of 5,000 that pays an annual coupon payment of $150. What is the interest rate Ford is paying on the borrowed funds? Suppose the market interest rate rises from 3 to 4 a year after Ford issues the bonds. Will the value of the bond increase or decrease?
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