Explain why the demand for loanable funds slopes downward and why the supply of loanable funds slopes upward
When the interest rate rises investment spending becomes more expensive, so people invest less. As the interest rate rises saving becomes more rewarding, so people want to save more. The inverse relation between interest and borrowing is reflected in the downward slope of the demand for loanable funds curve. The positive relation between interest and saving is reflected in the upward slope of the supply of loanable funds curve.
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Which of the following is not a characteristic of perfect competition?
a. Many small buyers. b. Different firms sell products with different features. c. Ease of entry into and exit from the market. d. Many small sellers.
In a two-economy model of the United States and another large economy made up of the rest of the world, if desired saving by the rest of the world declined,
A. U.S. investment would increase. B. the world real interest rate would increase. C. U.S. saving would decrease. D. the world real interest rate would decrease.
In the short-run Keynesian model, if the mpc equals 0.8, then to decrease aggregate spending by $30 billion at any output level, government spending must be decreased by ________ or net taxes must be increased by ________.
A. more than $30 billion; more than $30 billion B. $30 billion; $30 billion C. $30 billion; more than $30 billion D. less than $30 billion; less than $30 billion
In autumn, the Connecticut apple market is perfectly competitive. If market demand increases—resulting, say, from a change in consumer taste—the demand curves faced by each individual firm will, in the long run
a. become vertical b. become less elastic c. remain unchanged d. shift leftward e. shift downward