8 Real interest rate (percent per year) O 6 A 2 0 DLF 150 300 450 600 750 900 Loanable funds (billions of 2009 dollars) In the above figure, the demand for loanable funds curve is drawn for the average expected profit. If the real interest rate is constant at 6 percent and the expected profit rises, the amount of loanable funds demanded will be O less than $450 billion. $450 billion. O between $300 billion and $450 billion. O greater than $450 billion.

8 Real interest rate (percent per year) O 6 A 2 0 DLF 150 300 450 600 750 900 Loanable funds (billions of 2009 dollars) In the above figure, the demand for loanable funds curve is drawn for the average expected profit. If the real interest rate is constant at 6 percent and the expected profit rises, the amount of loanable funds demanded will be O less than $450 billion. $450 billion. O between $300 billion and $450 billion. O greater than $450 billion.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Who benefits from an increase in interest rates? O people who are borrowing money no one O people who are saving money O everyone Previous Next ASUS f6 19 & 5 8 近
Macmillan Learning Figure: Investment Projects Project F G H J K L M Rate of return on investment 20% 18 16 14 12 10 8 6 Cost of investment $ 500 300 1,000 200 2,000 1,500 1,200 800 Use Table: Investment Projects. If the market interest rate is 17%, the amount of investment demanded is: O $2,000. O $1,000. O $800. O $200.
Figure 10-6 Real interest rate 6% 5 4 3 2 1 0 30 Select one: O O O O 60 90 _____ 120 150 a. supply; rise; decreasing; increasing b. supply; fall; increasing; decreasing c. demand; fall; decreasing; decreasing d. demand; rise; increasing; decreasing 180 will Refer to Figure 10-6. The loanable funds market is in equilibrium, as shown in the figure above. As a result of an increase in the government budget deficit, the thereby the equilibrium real interest rate and the equilibrium quantity of loanable funds. S Quantity of loanable funds (millions of dollars) for loanable funds
Manipulate the graph to show what will happen to supply and demand in the market for loanable funds when the government budget deficit increases, changing the equilibrium quantity of loanable funds by 3 percentage points. Ceteris paribus, what is the new interest rate? interest rate: Ceteris paribus, private investment would increase. not change. decrease. % 20 10 9 Supply 8 Interest rate (%) 7 CO 5 LO 3 2 1 0 0 2 Demand 4 6 8 10 12 14 16 18 20 22 24 26 28 Quantity of loanable funds (% of GDP)
4. 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. INTEREST RATE (Percent) 10 9 1 0 0 Supply Demand 100 200 300 400 500 600 700 800 900 1000 LOANABLE FUNDS (Billions of dollars) ? is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied Suppose the interest rate is 4.5%. Based on the previous graph, quantity of loanable funds supplied is demanded, resulting in a of loanable funds. This would encourage lenders to the quantity of loanable funds supplied and the equilibrium interest rate of % than the quantity of loans the interest rates they charge, thereby the quantity of loanable funds demanded, moving the market toward
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2. Time: Investment A: Investment B: Year 0 Year 1 Year 2 Year 3 Year 4 Discount Rate Year 5 $500,000 $500,000 -$1.5 million $300,000 $300,000 $300,000 8% -$1.3 million $500,000 $400,000 $300,000 $200,000 $100,000 7% An investor is considering the two investments shown above. Please calculate the NPV and IRR for both A and B. And what is the crossover point here?