How do changes in the demand for and supply of loanable funds change the real interest rate and quantity of loanable funds?
What will be an ideal response?
The real interest rate is determined by the supply of loanable funds and the demand for loanable funds. The equilibrium real interest rate is the real interest rate at which the quantity of loanable funds supplied equals the quantity of loanable funds demanded. Changes in the demand for or supply of loanable funds change the equilibrium real interest rate and equilibrium quantity of loanable funds. If the demand for loanable funds increases and the supply does not change, the real interest rate rises and the quantity of loanable funds increases. If the demand for loanable funds decreases and the supply does not change, the real interest rate falls and the quantity of loanable funds decreases. If the supply of loanable funds increases and the demand does not change, the real interest rate falls and the quantity of loanable funds increases. If the supply of loanable funds decreases and the demand does not change, the real interest rate rises and the quantity of loanable funds decreases.
You might also like to view...
Foreign portfolio investment in the United States has continually declined since 1995
Indicate whether the statement is true or false
All of the following are true if both the upstream and downstream firm have market power except which one?
A) Both the upstream firm and the downstream firm set a price that exceeds their respective marginal costs. B) If the two firms were to merge, the combined firm would earn the same profit than if they did not merge. C) This situation is referred to as a successive monopoly. D) This situation is referred to as double marginalization.
An economics professor, upset about the rising cost of textbooks, proposed that his department purchase 50 copies of a statistics book so the students in the statistics class would not have to purchase their own books but rather could borrow a book for the semester and then return it for the next class to use. Which of the following strategies would not prevent a common resource problem with the
textbooks? a. Students will be required to pay a deposit for the textbook, which is refundable at the end of the semester when the book is returned in good condition. b. The textbooks are placed in a common area of the department so students can borrow and return them as needed. c. Students must sign a form agreeing to return the book or pay a fine equal to the replacement cost of the book. d. The textbooks are placed in the professor's office and will only be given to students who are registered members of the class. These students will not receive their final course grades until the books are returned.
If the economy is currently in equilibrium at a level of GDP that is below potential GDP, what would move the economy back to potential GDP
What will be an ideal response?