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.
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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![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)
6
5
4
32
1
0
0
100
Supply
200
300
400
LOANABLE FUNDS (Billions of dollars)
Demand
500
600
4](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F98e20a1f-e629-4ad6-857e-8adb65514c56%2F269ae9e4-1008-496b-9261-350b77b1aeaa%2Flgtcxm_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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)
6
5
4
32
1
0
0
100
Supply
200
300
400
LOANABLE FUNDS (Billions of dollars)
Demand
500
600
4
![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 3.5%. Based on the previous graph, the 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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F98e20a1f-e629-4ad6-857e-8adb65514c56%2F269ae9e4-1008-496b-9261-350b77b1aeaa%2Fjcts91u_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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 3.5%. Based on the previous graph, the 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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