Credit Market A. Plot the credit demand and supply curve in a figure. Specify the equi- librium real interest rate (r*) and the equilibrium quantity of credit (B*) in your figure. B. Everything else remaining unchanged, what is likely to happen to the credit market if the following scenario occurs? Separately and graphi- cally show the change of each scenario. Specify the new equilibrium in the credit market. B.1 Businesses in the economy see scope for growth and are planning to expand production in the future. B.2 Households expect a recession in near future. B.3 The government is planning to borrow money from financial in- stitutions for investment in infrastructures.

Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter1: Ten Principles Of Economics
Section: Chapter Questions
Problem 6PA
Question
Credit Market
A. Plot the credit demand and supply curve in a figure. Specify the equi-
librium real interest rate (r*) and the equilibrium quantity of credit
(B*) in your figure.
B. Everything else remaining unchanged, what is likely to happen to the
credit market if the following scenario occurs? Separately and graphi-
cally show the change of each scenario. Specify the new equilibrium in
the credit market.
B.1 Businesses in the economy see scope for growth and are planning
to expand production in the future.
B.2 Households expect a recession in near future.
B.3 The government is planning to borrow money from financial in-
stitutions for investment in infrastructures.
Transcribed Image Text:Credit Market A. Plot the credit demand and supply curve in a figure. Specify the equi- librium real interest rate (r*) and the equilibrium quantity of credit (B*) in your figure. B. Everything else remaining unchanged, what is likely to happen to the credit market if the following scenario occurs? Separately and graphi- cally show the change of each scenario. Specify the new equilibrium in the credit market. B.1 Businesses in the economy see scope for growth and are planning to expand production in the future. B.2 Households expect a recession in near future. B.3 The government is planning to borrow money from financial in- stitutions for investment in infrastructures.
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