Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
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Question
Chapter 29, Problem 2CYU
To determine
The issue with the given statement.
Expert Solution & Answer
Explanation of Solution
The loanable funds market has shown us that when interest rates increase, consumers desire to save more and spend less. However, an increase in interest rates also results in fewer investment-related projects with returns at least equal to the interest rate. Because it asserts that the amount of loanable funds given exceeds the amount of loanable funds sought, the statement "households will want to save more money than enterprises will want to invest" cannot reflect an equilibrium in the loanable funds market. If that were to happen, the interest rate would drop such that the amount of loanable money provided and sought were equal. The proper response is the
Hence the given statement is false.
Chapter 29 Solutions
Krugman's Economics For The Ap® Course
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