Loanable Funds Market: It is an imaginary market which illustrates the market result of the demand for funds which are generated by borrowers and the supply of funds which are provided by the lenders. Demand for Loanable Funds: It is represented by a downward sloping curve which shows that as the interest rate increases, the demand for loanable funds decreases and vice versa. Supply for Loanable Fund: It is represented by the curve that slopes upwards which means that as the interest rate increases, the supply of loanable fund also increases and vice versa. Equilibrium Interest Rate: In the loanable fund market, the point where demand curve and supply curve intersect each other gives the equilibrium interest rate. Change in Interest Rate: Interest rate depends on several factors. One such factor is expected inflation rate. The relationship of interest rate and inflation rate is described by the fisher effect. Inflation: When the price of any good increases continuously for an interval of time it is called inflation. Fisher Effect: According to this effect, when there is a rise in the expected inflation rate then there is always a rise in the nominal interest rate provided loanable fund quantity and interest rate does not change.

Question

Want to see the full answer?

Answer 1

Question

Chapter 10, Problem 11P

To determine

Concept introduction:

Loanable Funds Market: It is an imaginary market which illustrates the market result of the demand for funds which are generated by borrowers and the supply of funds which are provided by the lenders.

Demand for Loanable Funds: It is represented by a downward sloping curve which shows that as the interest rate increases, the demand for loanable funds decreases and vice versa.

Supply for Loanable Fund: It is represented by the curve that slopes upwards which means that as the interest rate increases, the supply of loanable fund also increases and vice versa.

Equilibrium Interest Rate: In the loanable fund market, the point where demand curve and supply curve intersect each other gives the equilibrium interest rate.

Change in Interest Rate: Interest rate depends on several factors. One such factor is expected inflation rate. The relationship of interest rate and inflation rate is described by the fisher effect.

Inflation: When the price of any good increases continuously for an interval of time it is called inflation.

Fisher Effect: According to this effect, when there is a rise in the expected inflation rate then there is always a rise in the nominal interest rate provided loanable fund quantity and interest rate does not change.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Driving Quiz X My Course G city place w x D2L Login - Univ X D2L Login - Univ x D2L Login - U acmillanlearning.com/ihub/assessment/f188d950-dd73-11e0-9572-0800200c9a66/4db68a5e-69bb-4767-8d6c-a12d +1687 pts /1800 © Macmillan Learning Question 6 of 18 > The graph shows the average total cost (ATC) curve, the marginal cost (MC) curve, the average variable cost (AVC) curve, and the marginal revenue (MR) curve (which is also the market price) for a perfectly competitive firm that produces terrible towels. Answer the three questions, assuming that the firm is profit-maximizing and does not shut down in the short run. What is the firm's total revenue? S What is the firm's total cost? $ What is the firm's profit? (Enter a negative number for a loss.) $ Price $320 $300 $200 $150 205 260 336 365 Quantity MC ATC AVC MR=P

1. Suppose that the two nations face the following benefits of pollution, B, and costs of abatement, C: BN = 10, Bs = 7; CN = 5, Cs = 4. Further assume that if the nation chooses to abate pollution, it still receives the benefits of pollution but now must pay the cost of abatement as well. a. Identify the payoffs that accrue to each nation under the four different possible outcomes of the game and present these payoffs in the normal form of the game. b. Recall that the term dominant strategy defines the condition that a player in a game would prefer to play that strategy (in this case either pollute or abate) regardless of the strategy chosen by the other player in the game. Does either nation have a dominant strategy in this game? If so, what is it? c. Identify the Nash equilibria, or non-cooperative equilibria, of this game.

agrody calming Inted 001 and me 2. A homeowner is concerned about the various air pollutants (e.g., benzene and methane) released in her house when she cooks with natural gas. She is considering replacing her gas oven and stove with an electric stove comprising an induction cooktop and convection oven. The new appliance costs $900 to purchase and install. Capping the old gas line costs an additional $150 (a one-time fee). The old line must be inspected for leaks each year after capping, at a cost of $35 for each inspection. a. If the homeowner plans to remain in the house for four more years and the discount rate is 4%, what is the minimum present value of the benefits that the homeowner would need to experience for this purchase to be justified based on its private net sub present value? b. While trying to understand how she might express the value of reduced exposure to indoor air pollutants in dollar terms, the homeowner consulted the EPA website and found estimates provided by…