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.
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.
Chapter21: Financial Markets, Saving, And Investment
Section: Chapter Questions
Problem 9P
Related questions
Question
PLEASE ANSWER ALL QUESTIONS NOT JUST SOME
PLEASE WRITE THE EXACT NUMBERS FOR THE GRAPH.
PLEASE READ CAREFULLY, THIS MAY BE A SIMILAR QUESTION, BUT ALL QUESTIONS ARE DIFFERENT
Transcribed Image Text:3. Supply and demand for 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.
7
Supply
Demand
100
200
300
400
500
600
700
800
LOANABLE FUNDS (Billions of dollars)
Investment
Saving
is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds
supplied
decreases
greater
increases
less
Suppose the interest rate is 3.5%. Based on the previous graph, the quantity of loanable funds supplied is
than the quantity of raise
loans demanded, resulting in a
of loanable funds. This would encourage lenders to
the interest rates they charge,
the quantity of loanable funds supplied and
thereby
market toward the equilibrium interest rate of
the quantity of loanable funds demanded, moving the Hower
increasing
decreasing
incréasing
surplus
decreasing
shortage
INTEREST RATE (Percent)
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