In the graph you've just made, what happens if the real interest rate is 4 percent per year? A. The real interest rate rises to 8 percent per year, where there is a surplus of loanable funds. B. The real interest rate fluctuates between 4 and 8 percent per year. C. The real interest rate remains at 4 percent per year. D. There is a shortage of loanable funds and the real interest rate rises to 6 percent per year.
In the graph you've just made, what happens if the real interest rate is 4 percent per year? A. The real interest rate rises to 8 percent per year, where there is a surplus of loanable funds. B. The real interest rate fluctuates between 4 and 8 percent per year. C. The real interest rate remains at 4 percent per year. D. There is a shortage of loanable funds and the real interest rate rises to 6 percent per year.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
In the graph you've just made, what happens if the real interest rate is 4 percent per year?
A. The real interest rate rises to 8 percent per year, where there is a surplus of loanable funds.
B. The real interest rate fluctuates between 4 and 8 percent per year.
C. The real interest rate remains at 4 percent per year.
D. There is a shortage of loanable funds and the real interest rate rises to 6 percent per year.
Use screenshot attached below to answer the question thanks!
Transcribed Image Text:At real interest rates
below 6 percent a year,
the quantity of loanable
funds demanded exceeds
the quantity supplied and
the real interest rate rises.
Regardless of whether
there is a surplus or a
shortage of loanable funds,
the real interest rate
changes and is pulled
toward an equilibrium level.
Ⓒ
Reset
Real interest rate (percent per year)
12
10
8
6
4
2
10
Surplus of
funds-real
interest rate
falls
Shortage of
funds-real
interest rate
rises
15
20
Equilibrium
25
3.0
SLF
DLF
1
3.5
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