Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Chapter 27, Problem 6SCQ

Imagine that you are in the position of buying loans in the secondary market (that is, buying the right to collect the payments on loans) for a bank or other financial services company. Explain why you would be willing to pay more or less for a given loan If:

  1. The borrower has been late on a number of loan payments
  2. Interest rates In the economy as a whole have risen since the bank made the loan
  3. The borrower Is a firm that has just declared a high level of profits
  4. Interest rates in the economy as a whole have fallen since the bank made the loan

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The table below shows the market for credit cards at various interest rates in millions of dollars. What is the equilibrium interest rate? Interest Quantity of Financial Capital Supplied Quantity of Financial Capital Demanded Rate (Lending) ($ millions) (Borrowing) ($ millions) 9% $200 $275 10.5% $205 $255 12.0% $210 $235 13.5% $215 $215 15.0% $220 $195 16.5% $225 $175 Provide your answer below:
Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Which curve will shift: supply or demand? In which direction will the curve shift: right or left? (It may help to use a demand and supply diagram to conduct your analysis.)  a. The number of people at the most common ages for home-buying decreases.    b. Rents rise extremely rapidly.  c. Banks that have made home loans find that a larger number of people than they expected are not repaying those loans.  d. Because of a threat of a war, people become uncertain about their economic future.The overall level of saving in the economy diminishes.  e. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.
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Principles of Economics 2e

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