Chapter 13, Problem 2QFR

When does the supply of loanable funds increase? The supply of loanable funds increases when disposable income _______ or wealth _______.     A. decreases; increases   B. decreases; decreases   C. increases; increases   D. increases; decreases Thanks!

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.

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.

What must have happened in the loanable funds market to produce the 2020 level of interest rates what caused this change?

How does an increase in government borrowing affect the equilibrium interest rate in the market for loanable funds?

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?

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?

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.

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.