Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 29, Problem 3QP
(a)
To determine
Identify the changes in interest rate when the
(b)
To determine
Identify the changes in interest rate when the supply of loanable funds decreases.
(c)
To determine
Identify the changes in interest rate when the demand for investment loans rise.
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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_______________________________________________________________________________
Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S. a. fell. The increased saving would increase the quantity of loanable funds demanded.b. fell. The increased saving would increase the quantity of loanable funds supplied.c. rose. The increased saving would increase the quantity of loanable funds demanded.d. rose. The increased saving would increase the quantity of loanable funds supplied.
If the demand for loans is held constant, what is the immediate effect of an increase in the supply of loanable funds?
A)Equilibrium interest rates decrease
B)The equilibrium quantity of loanable funds decreases
C)Total investment decreases
Chapter 29 Solutions
Economics (MindTap Course List)
Ch. 29.1 - Prob. 1STCh. 29.1 - Prob. 2STCh. 29.1 - Prob. 3STCh. 29.1 - Prob. 4STCh. 29.2 - Prob. 1STCh. 29.2 - Prob. 2STCh. 29.2 - Prob. 3STCh. 29.4 - Prob. 1STCh. 29.4 - Prob. 2STCh. 29.4 - Prob. 3ST
Ch. 29.4 - Prob. 4STCh. 29 - Prob. 1QPCh. 29 - Prob. 2QPCh. 29 - Prob. 3QPCh. 29 - Prob. 4QPCh. 29 - Prob. 5QPCh. 29 - Prob. 6QPCh. 29 - Prob. 7QPCh. 29 - Prob. 8QPCh. 29 - Prob. 9QPCh. 29 - Prob. 10QPCh. 29 - Prob. 11QPCh. 29 - Prob. 12QPCh. 29 - Prob. 13QPCh. 29 - Prob. 14QPCh. 29 - Prob. 15QPCh. 29 - Prob. 16QPCh. 29 - Prob. 17QPCh. 29 - Prob. 1WNGCh. 29 - Prob. 2WNGCh. 29 - Prob. 3WNG
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- 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?arrow_forwardIf and when the demand of loanable funds shifts to the left: Group of answer choices 1. This is good news for people who rely on the interest earnings from their savings but bad news for people who have outstanding home loans. 2. This is bad news for people who rely on the interest earnings from their savings but good news for people who have outstanding home loans. 3. This is good news both for people who rely on the interest earnings from their savings as well as those who have outstanding home loans. 4. This is bad news both for people who rely on the interest earnings from their savings as well as those who have outstanding home loans.arrow_forwardUsing the market for loanable fund diagram, show graphically how it affects interest rate and investment in each of the following cases. a) G > T. b) A book titled ‘Live for Tomorrow’ convinces people to spend less. c) Tax on interest income rises. please answer step by step.Answer must be correct.Show all calculation. please Don,t copy from anywhere.arrow_forward
- Draw a graph of the supply and demand of loanable funds. Then, show how the interest rate will be affected when the following scenarios occur: a. The government implements a program that reduces investment tax credits. b. The government budget deficit is reduced by 30%. (Hint: Does the government still need to borrow?) c. More foreigners are saving their money in U.S. banks.arrow_forwarda high interest rate can also indicate that something positive is happening in the economy. Describe how positive factors can lead to an increased in the demand for loanable funds and then an increase in the interest rate.arrow_forwardPatrick wants to start his own dental practice, but his expenditures exceed his income. Which statement best describes Patrick? a. He is a saver who demands loanable finds from the financial system. b. He is a saver who supplies loariable funds to the financial system c. He is a borrower who demands loanable funds from the financial system. d. He is a borrower who supplies loanable funds to the financial systemarrow_forward
- Question:As interest rate decreases, what happens to the quantity of loanable funds demanded? a. Some borrowers will demand more funds whereas others will demand less. b. There will be no change in the quantity demanded. c. Quantity demanded will increase. d. Quantity demanded will decrease. QUESTION What effect will an increase in interest rates have on the quantity of loanable funds supplied? • a. There will be no change in quantity supplied. • b. Some lenders will offer more whereas others will offer less. • c. Quantity supplied will decrease. • d. Quantity supplied will increase.arrow_forwardPlease answer the given four questions related to the market for loanable funds. What effect will an increase in interest rates have on the quantity of loanable funds supplied? There will be no change in quantity supplied. Quantity supplied will decrease. Some lenders will offer more whereas others offer less. Quantity supplied will increase. As interest rate decreases, what happens to the quantity of loanable funds demanded? Some borrowers will demand more funds whereas others will demand less. There will be no change in quantity demanded. Quantity demanded will increase. Quantity demanded will decrease. Which of the terms acts as the "price" in the market for loanable funds? demand capital supply If the projected rate of return for a project is less than the interest rate for a loan that is necessary to complete the project, how will the borrowing business act? The business will proceed anyway, knowing that the return is only an estimate. The…arrow_forwardConsider the market for loanable fund. Answer the question below. 2.a. The market equilibrium interest rate is 3%. But current interest rate is 4%. Then, is the supply of loanable fund larger, smaller or equal to the demand for loanable fund? 2.b. People’s preference for saving increased. Answer if the equilibrium interest rate and investment would increase, decrease, or would not change. Interest rate: Investment:arrow_forward
- Using a supply and demand diagram, explain the following scenario impacts the market for loanable funds. Show your work, and be specific about what happens to the equilibrium. (b) The government starts a program that makes it easier for new homeowners to takeout a mortgage.arrow_forwardInvestment — End of Chapter Problem Move the appropriate curve or curves in each graph to illustrate the effect of each of the four events on the market for loanable funds. If the event should not impact the market for loanable funds, then leave the graph unchanged.arrow_forwardIf 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.arrow_forward
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