Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 13, Problem 5P
To determine
The reason why the demand slope of Loanable fund curve is downward to the right.
Concept Introduction:
In the market of loanable funds which is the market where individual wish to borrow fund or save in order to earn interest.
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Students have asked these similar questions
Figure: Supply of Loanable Funds) Use Figure: Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the:
Interest
-ate (%)
12
10
8
6
4
2
S
0 10 20 30 40 50 60 70 80 90
Loanable funds (billions of dollars)
O quantity of loanable funds supplied falls by $20 billion.
supply of loanable funds falls by $10 billion...
quantity of loanable funds supplied rises by $20 billion.
O supply of loanable funds rises by $20 billion.
Question 29
How would this expenditure affect the loanable funds market? [Select]
[Select]
Supply of loans shifts to the right.
Demand for loans shifts to the right.
3. 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.
Supply
Demand
100 200 300 400 500 600 700 800 900 1000 1100 1200
LOANABLE FUNDS (Bons of dollars)
is the source of the supply of loanable funds. As the interest rate rises, the quantity of loanable funds supplied
than the quantity of loans
the interest rates they charge,
the quantity of loanable funds demanded, moving the market
Suppose the interest rate is 5.5%. Based on the previous graph, the quantity of loanable funds supplied is
demanded, resulting in a
of loanable funds. This would encourage lenders to
thereby
the quantity of loanable funds supplied and
toward the equilibrium interest rate of
%
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- (Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. An increase in private savings will shift the supply curve for loanable funds to the Interest rate causing the interest rate to r* = 6% E Supplyarrow_forward5. 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) 12 11 10 10 3 2 1 0 Supply Demand 100 200 300 400 500 600 700 800 900 1000 1100 1200 LOANABLE FUNDS (Billions of dollars)arrow_forwardSolve the attachmentarrow_forward
- K Consider the graph to answer the following questions: a. The shift from S, to S₂ represents in the supply of loanable funds. b. With the shift in supply, the equilibrium quantity of loanable funds c. With the change in the equilibrium quantity of loanable funds, the quantity of saving and the quantity of investment ▼ C Real Interest Rate Market for Loanable Funds L241 Loanable Funds ($ per year) S2 S1arrow_forward5. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) (?) Supply INTEREST RATE (Percent) Demand LOANABLE FUNDS (Billions of dollars) Demand 0 Supplyarrow_forwardSubject:economicsarrow_forward
- Dd.27.arrow_forward6. Tax systems and saving This question addresses the impact of saving on an economy by examining what happens if tax laws change to induce saving and how changes in tax laws can discourage saving. The following graph shows the market for loanable funds. Show the impact of a change in the tax law that successfully encourages saving by shifting either the demand curve (D), the supply curve (S), or both. INTEREST RATE LOANABLE FUNDS S 6.4. (?)arrow_forwardN6 Assume the US market for loanable funds is in equilibrium. Describe how an increase in the federal budget deficit will, all else equal, affect (A) the equilibrium real interest rate, (B) the equilibrium quantity of loans exchanged, and (C) the level of private investment spending.arrow_forward
- 2. The supply of saving Suppose that Maria receives a pay raise of $1,050 per year. She can either use the extra money to consume goods and services, or she can save it by depositing it in a bank. For each of the alternative annual interest rates in the following table, indicate how much interest Maria would earn per year on her annual raise if she saves it. (Note: Assume that no income taxes are deducted.) Interest Rate Interest Earned (Dollars) (Dollars) (Percent) 8 20 A lower interest rate gives Maria incentive to save. The following graph shows a variety of possible curves representing the supply of saving.arrow_forwardOnly typed answer and please answer correctlyarrow_forward(a) U.S. (b) U.K. Interest rate Interest rate Supply 6% EA 4 Demand Quantity of loanable funds 4% 2 EB Supply Demand Quantity of loanable funds Given the loanable funds market graphs above, explain what will happen in the: 。 UK-| USarrow_forward
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