Question

which of the following statements about the loanable funds market is (are) correct?
(x) When the supply of loanable funds shifts to the right then the equilibrium real interest rate decreases and the equilibrium quantity of loanable funds decreases.
(y) When the demand for loanable funds shifts to the right then the equilibrium real interest rate increases and the equilibrium quantity of loanable funds increases.
(z) If the demand for loanable funds shifts to the right and the supply of loanable funds shifts to the left, then the real interest rate rises.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

Which of the following would be consistent with a decrease in the U.S. real interest rate?
(x) A French citizen purchases a German bond instead of the U.S. bond they had intended to purchase.
(y) A U.S. manufacturer decides it can now afford to borrow funds to expand its production facility.
(z) Jane, a U.S. citizen, deposits more into her savings account at the local bank and decides against the purchase of a bond from a Canadian business.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

which of the following statements is (are) correct?
(x) In the open economy macroeconomic model of the U.S. economy, net capital outflow is equal to the quantity of U.S. dollars supplied in the foreign exchange market.
(y) In the market for foreign currency exchange, the amount of U.S. net capital outflow desired at each real interest rate represents the quantity of U.S. dollars supplied for the purpose of buying foreign assets.
(z) In the market for foreign currency exchange, the amount of U.S. net exports desired at each real exchange rate represents the quantity of U.S. dollars demanded for the purpose of buying U.S. goods and services by foreign residents
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

Answer 1

1) Increase in loanable funds Decrease interest rate and increase QUANTITY of funds.

Increase in demand of funds will increase interest rate and increase QUANTITY of funds

Increase in demand of funds and Decrease in supply of funds will increase interest rate but change in QUANTITY of funds is ambiguous.

So yand z are correct.

OPTION d is correct

2) Decrease in US interest rate causing lower return on US assest which make french Investor to shift from US ro french assest.

Decrease interest rate will decrease cost of borrowing and Investment,so Investment willl Increase amd manufacturer expand its Production facility

Jane will deposit less in her saving account as interest rate gets lower which results in lower returnnon deposit.

So Only x and y are correct.

3)option Y and Z are correct ( indirect definition of net capital outflow and net exports).

Option D is correct