When the Federal Reserve increases the federal funds rate, bank loans ________, the supply of loanable funds ________, and the real interest rate ________. Group of answer choices A. decrease; decreases; rises B. do not change; decreases; rises C. increase; increases; falls D. increase; increases; rises E. decrease; does not change; rises

When the Federal Reserve increases the federal funds rate, bank loans , the supply of loanable funds , and the real interest rate . Group of answer choices A. decrease; decreases; rises B. do not change; decreases; rises C. increase; increases; falls D. increase; increases; rises E. decrease; does not change; rises

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter29: Interest, Rent, And Profit

Section: Chapter Questions

Problem 3QP

See similar textbooks

Related questions

Q: A change in the tax laws that increases the supply of loanable funds will have a smaller effect on…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: The interest rate is the opportunity cost A. of holding money. B. of investing in stocks. C.…

A: The next best alternative that is foregone is called opportunity cost. It is also known as…

Q: What is the effect of a fall in the real interest rate on the demand for loanable funds? A fall in…

A: The loanable funds demand curve depicts the inverse relationship between the quantity of loanable…

Q: Consider the market for loanable fund. Answer the question below. 2.a. The market equilibrium…

A: Please find the answer below.

Q: 1) Draw a saving-investment diagram to show how each of the following changes shifts the IS curve.…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Using the framework of the supply and demand of loanable funds, analyze the possible effect on the…

A: The objective of the question is to analyze the possible effect on the equilibrium interest rate in…

Q: (Percent) 2 1 7 10 9 8 0 0 Supply Demand 100 200 300 400 500 600 700 800 .LOANABLE FUNDS (Billions…

A: Savings is the source of the supply of loanable funds. As the interest rate falls, the quantity of…

Q: The French Government runs a budget surplus to finance its expenditure. Use the loanable funds model…

A: Here, it is given that the French government has budget surplus, which implies that it collects more…

Q: Consider the supply and the demand in the market for loanable fund. If Mari purchased construction…

A: If Mari purchased construction company’s stocks - This is added to supply side. If Mari borrowed to…

Q: se the loanable funds market to illustrate the effect of the following events on the equilibrium.…

A: Loanable funds market determines equilibrium in the fund rate. Equilibrium is reached where quantity…

Q: A rise in the federal funds rate a. raises the long-term real interest rate. b. does not change the…

A: The Federal Reserve holds accounts for banks and other depository institutions in the United States.…

Question

When the Federal Reserve increases the federal funds rate, bank loans ________, the supply of loanable funds ________, and the real interest rate ________.

Group of answer choices

A. decrease; decreases; rises

B. do not change; decreases; rises

C. increase; increases; falls

D. increase; increases; rises

E. decrease; does not change; rises

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define Federal reserve

VIEW

Step 2: Explain each option

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Need help with multiple choice macroeconomic question
When the interest rate decreases, a)people would want to lend more, making the supply of loanable funds increase. b)people would want to lend less, making the supply of loanable funds decrease. c)people would want to lend more, making the quantity of loanable funds supplied increase. d)people would want to lend less, making the quantity of loanable funds supplied decrease.
Draw a graph depicting interest rates at the quantity of loanable funds. Answer the following questions regarding this graph. Explain why the supply of loanable funds is upward sloping. Explain why the demand of loanable funds is downward sloping. If the Federal Reserve sells government bonds, show what will happen to this graph. Explain the effects on interest rates and the quantity of loanable funds. If the Federal Reserve lowers the required reserve rate, show what will happen to this graph. Explain the effects on interest rates and the quantity of loanable funds.
PLEASE HELP ME
Interest Rate 0 Multiple Choice O O A O S₁ BC Quantity Refer to the diagram. Suppose that the demand for loanable funds is D₁ and the supply of loanable funds initially is S₁. If the supply of loanable funds increases to So, the equilibrium quantity of funds borrowed will increase from E to F. increase from A to B. increase from B to C. So decrease from G to F. Do D₁
In the loanable funds market, if firms become more optimistic about future profitability, then the a demand for loanable funds will increase, interest rates will increase, and private sector investment spending will increase. b demand for loanable funds will decrease, interest rates will decrease, and the equilibrium quantity of borrowing will decrease. c supply of loanable funds will increase, interest rates will decrease, and the equilibrium quantity of borrowing will increase. d supply of loanable funds will increase, interest rates will increase, and private sector investment spending will increase.
Recently, the economies of North Korea and Norway have begun to grow very rapidly. This increases their citizens’ income and wealth as well. In turn, these citizens increase their savings not only in their country, but also in the United States. In this case, which of the following statements is correct? A. The supply of loanable funds decreases as savings increase. B. The supply of loanable funds increases as savings increase. C. The demand of loanable funds decreases as savings increase. D. Both supply and demand of loanable funds increase as savings increase.
Recently, the economies of North Korea and Norway have begun to grow very rapidly. This increases their citizens’ income and wealth as well. In turn, these citizens increase their savings not only in their country, but also in the United States. In this case, which of the following statements is correct? A. The supply of loanable funds decreases as savings increase. B. The supply of loanable funds increases as savings increase. C. The demand of loanable funds decreases as savings increase. D. Both supply and demand of loanable funds increase as savings increase. Clear my choice
Assume that a firm is considering building a factory that will cost $5 million. It believes that it can get a profit from this factory of $600,000 per year for many years. The interest rate at which the firm can borrow money is 15 percent. After evaluating whether it should build the factory, the firm decides that it should Select one: a. build b. not build
True or false, with explanation Suppose the bank deposit has 30% annual interest rate. It implies that the purchasing power of depositors increases by 30% after one year.
Using the market for loanable fund diagram, show graphically how it affects interest rate and investment in each of the following cases. a) G > T. b) A book titled ‘Live for Tomorrow’ convinces people to spend less. c) Tax on interest income rises. please answer step by step.Answer must be correct.Show all calculation. please Don,t copy from anywhere.
The decrease in savings causes the decrease in supply of loanable funds. Select one: True False