Which of the following is true in the context of the loanable funds market? Group of answer choices The supply of loanable funds curve reflects the negative relation between the market rate of interest and the quantity of savings. Savers are the suppliers of loanable funds, and borrowers are the demanders of loanable funds. Banks pay a higher interest rate on consumer savings than what they could earn by lending these funds out. The supply of loanable funds curve slopes downward, and the demand for loanable funds curve slopes upward. Households play the role of financial intermediaries.
Added by Juana A.
Step 1
Step 1: In the loanable funds market, the supply of loanable funds comes from savers who are willing to save and lend their money, while the demand for loanable funds comes from borrowers who want to borrow money for investment or consumption. Show more…
Show all steps
Your feedback will help us improve your experience
Andrew Davis and 63 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
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.
Andrew D.
If foreign income and wealth decrease, this would most likely a. not affect the market for loanable funds. b. cause the supply of loanable funds to increase. c. cause the supply of loanable funds to decrease. d. cause the demand for loanable funds to increase in order for foreigners to maintain consumption. e. cause the demand for loanable funds to decrease.
Jennifer S.
The source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied increases. Suppose the interest rate is 3.59. Based on the previous graph, the quantity of loanable funds supplied is greater than the quantity of loans demanded, resulting in an excess supply of loanable funds. This would encourage lenders to lower the interest rates they charge, thereby increasing the quantity of loanable funds supplied and decreasing the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate.
Lottie A.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD