The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanablefunds, and the downward-sloping blue line represents the demand for loanable funds.10Supply8Demand100200300400 500600 700 800900 1000LOANABLE FUNDS (Billions of dollars)is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied increases vSuppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied isv than the quantity of loansdemanded, resulting in av of loanable funds. This would encourage lenders tov the interest rates they charge,therebyv the quantity of loanable funds supplied andv the quantity of loanable funds demanded, moving the markettoward the equilibrium interest rate of5% .INTEREST RATE (Percent)

Demand for loanable funds is negatively related to interest rates. It means an increase in interest…

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. 10 Supply Demand 100 600 700 800 900 1000 INTEREST RATE (Percent) - O n . n N - O

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. 10 Supply Demand 100 600 700 800 900 1000 INTEREST RATE (Percent) - O n . n N - O

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 5P

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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. 10 Supply 8 500, 5 Demand 1 100 200 300 400 500 600 700 800 900 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, the quantity of loanable funds supplied is v than the quantity of loans demanded, resulting in a of loanable funds. This would encourage lenders to the interest rates they charge, thereby ▼ the quantity of loanable funds supplied and ▼ the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of % INTEREST RATE (Percent)
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) 2 1 10 9 Supply 0 0 100 Demand 200 300 400 500 600 700 800 900 1000 LOANABLE FUNDS (Billions of dollars) ? Investment is the source of the demand for loanable funds. As the interest rate rises, the quantity of loanable funds demanded decreases Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is demanded, resulting in a shortage of loanable funds. This would encourage lenders to raise the interest rates they charge, thereby the quantity of loanable funds supplied and the equilibrium interest rate of % less than the quantity of loans the quantity of loanable funds demanded, moving the market toward
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. Supply 5 Demand 1 100 200 300 400 500 600 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 3.5%. Based on the previous graph, the quantity of loanable funds supplied is than the quantity of loans ▼ of loanable funds. This would encourage lenders to the interest rates they charge, thereby demanded, resulting in a the quantity of loanable funds supplied and the quantity of loanable funds demanded, moving the market toward 0% the equilibrium interest rate of INTEREST RATE (Percent)
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 8 50 3 2 1 0 Supply Demand 0 100 200 300 400 500 600 700 800 900 1000 LOANABLE FUNDS (Billions of dollars) ? is the source of the supply of loanable funds. As the interest rate rises, the quantity of loanable funds supplied Suppose the interest rate is 4.5%. 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
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. NOTE: the options for the first dropdown question is (investment or saving), the options for the second dropdown question is (decreases or increases), the options for the third dropdown question is (greater or less), the options for the fourth dropdown question is (surplus or shortage), the options for the fifth dropdown question is (raise or lower), the options for the sixth dropdown question is (increasing or drecreasing), and the options for the seventh dropdown question is also (increasing or decreasing)
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. 8 7 Supply 4 3 2 Demand 1 100 200 300 400 500 600 700 800 LOANABLE FUNDS (Billions of dollars) is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded Suppose the interest rate is 3.5%. Based on the previous graph, the quantity of loanable funds supplied is than the quantity of loans demanded, resulting in a of loanable funds. This would encourage lenders to the interest rates they charge, thereby the quantity of loanable funds supplied and the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of % INTEREST RATE (Percent)
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) 12 11 10 9 2 Supply Demand 0 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 LOANABLE FUNDS (Billions of dollars)
Draw a graph to illustrate the effect of a decrease in the demand for loanable funds and a smaller decrease in the supply of loanable funds on the real interest rate and the equilibrium quantity of loanable funds. Draw a demand for loanable funds curve. Label it DLF Draw a supply of loanable funds curve. Label it SLF Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF₁. Draw a curve that shows a smaller decrease in the supply of loanable funds. Label it SLF₁. Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2. KKKTES 12.0 10.0 8.0 6.0 4.0 20 Real interest rate (percent per year) 0.0+ 0.0 5.0 Q Q 2 1.0 2.0 3.0 4.0 Loanable funds (trillions of 2012 dollars) >>> Draw only the objects specified in the question.
The table shows an economy's demand for loanable funds and supply of loanable funds schedules when the government's budget is balanced. The quantity of loanable funds demanded increases by $1.0 trillion at each real interest rate. The quantity of loanable funds supplied increases by $2.0 trillion at each real interest rate. After these changes, what is the real interest rate, the quantity of loanable funds, investment, and private saving? >>> Answer to 1 decimal place. The real interest rate is 5 percent a year. The quantity of loanable funds is $ trillion, investment is $ trillion, and saving is $s trillion. Real interest rate (percent per year) 45678 9 10 Loanable funds Loanable funds demanded supplied (trillions of 2012 dollars per year) 8.5 8.0 7.5 7.0 6.5 6.0 5.5 6.5 7.0 7.5 8.0 8.5 9.0 9.5
↑ Match each of the following scenarios with the appropriate graph of the market for loanable funds. NEAL Loanable funds Loanable funds 292 D₁ D₂ Loanable funds Loanable funds a. An increase in the real interest rate results in only a small increase in private saving by households. This matches graph b. A decrease in the real interest rate results in a substantial increase in spending on investment projects by businesses. This matches graph c. The federal government eliminates RRSPs and TFSAS (tax-deductible retirement accounts). This matches graph d. The federal government reduces the tax on corporate profits. (Assume no change in the federal budget deficit or budget surplus.) This matches graph
The following graph shows the loanable funds market. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Consider each scenario separately by returning the graph to its starting position when moving from one scenario to the next. (Note: You will not be graded on any changes you make to the graph.) 14 INTEREST RATE (Percent) Demand Supply LOANABLE FUNDS (Billions of dollars) Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 18%. Now suppose there is a decrease in the tax rate on interest income, from 18% to 14%. Shift the appropriate curve on the graph to reflect this change. Demand Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending…
Draw a correctly labeled graph of the loanable funds market showing the equilibrium real interest rate and the equilibrium quantity of loanable funds.