Answered: 18 16 Supply 14 Demand 12 10 A 6 4 2 30…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please use the graph to answer the given questions. Assume the people act rationally.

Which of the statements best describes a situation represented by point A?

a) Carly decides against purchasing a corporate bond because she has another investment opportunity that returns 12%.

b) Jeff agrees to lend money to his brother, who plans to use the funds to open a shoe store.

c) Janine predicts that, if she borrows to expand operations, she will earn a rate of profit higher than the interest rate of the loan. So, she decides to take out the loan.

d) Wayne projects that if he takes out a loan to open another gym franchise, he will earn a lower return than the interest rate he would have to pay, so he decides against it.

Given the market conditions, what will be the prevailing interest rate?

a) 10%

b) 2%

b) 6%

d) 18%

e) 12%

Given the market conditions, how much will be available in loanable funds?

a) $90 billion

b) $50 billion

c) $70 billion

d) $10 billion

e) $30 billion

18
16
Supply
14
Demand
12
10
A
6
4
2
30
90
0
10
40
50
60
70
80
Quantity of loanable funds (in billions of dollars)
Interest rate (%)
20

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