INTEREST RATE (Percent) 12 11 10 9 0 Supply Demand 100 200 300 400 500 600 700 800 900 1000 1100 1200 LOANABLE FUNDS (Billions of dollars) (?) Investment is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied decreases ▼ Suppose the interest rate is 5.5%. Based on the previous graph, the quantity of loanable funds supplied is greater than the quantity of loans demanded, resulting in a surplus of loanable funds. This would encourage lenders to lower the interest rates they charge, thereby decreasing the quantity of loanable funds supplied and increasing the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of 5%

INTEREST RATE (Percent) 12 11 10 9 0 Supply Demand 100 200 300 400 500 600 700 800 900 1000 1100 1200 LOANABLE FUNDS (Billions of dollars) (?) Investment is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied decreases ▼ Suppose the interest rate is 5.5%. Based on the previous graph, the quantity of loanable funds supplied is greater than the quantity of loans demanded, resulting in a surplus of loanable funds. This would encourage lenders to lower the interest rates they charge, thereby decreasing the quantity of loanable funds supplied and increasing the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of 5%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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