Using supply and demand to analyze the loanable funds market, which of the following belongs on the Y axis? 1. the quantity of loanable funds 2. the demand curve 3. the supply curve 4. the interest rate
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Step 1: In the supply and demand framework of the loanable funds market, the Y axis represents the price of borrowing, which is the interest rate. Show more…
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If there is a shortage of loanable funds, then a. the supply for loanable funds shifts right and the demand shifts left. b. the supply for loanable funds shifts left and the demand shifts right. c. neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. d. neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.
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Manipulate the graph to show what will happen to supply and demand in the market for loanable funds when the government budget deficit increases, changing the equilibrium quantity of loanable funds by 3 percentage points. Ceteris paribus, what is the new interest rate? interest rate: % Ceteris paribus, private investment would not change. decrease. increase.
An increase in the real interest rate a. shifts the supply of loanable funds curve to the right. b. shifts the supply of loanable funds curve to the left. c. shifts the loanable funds demand curve to the right. d. shifts the loanable funds demand curve to the left. e. does none of the above.
Financial Markets, Saving, and Investment
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