Question

Question 10 1.67 pts If the interest rate in the loanable funds market is currently below the equilibrium level, then the quantity of funds demanded is the quantity of funds supplied, and we can expect the interest rate to over time. O greater than increase O less than increase O greater than: decrease less than: decrease « Previous Next >

Answer 1

1) Option A

If the interest rate are below the equilibrium level then it means they are lower. In that case, the demand for loanable funds will be greater because the cost of borrowing is lower but the supply of loanable funds will be less than the demand. There will be a rise in the interest rate and equilibrium will be established.

2) Jose sold his house after living in it for 10 years. This will not be counted in the GDP because it is not a new house but the commission paid to broker will count in the GDP.
The transaction by Brian also won't get into the GDP because it was recorded in the year Brian purchased it.
The production of the company will be in the GDP count.

(200000 * 0.06) + (12 * 5.5) + (2 * 5) = 12076

3) Option A

A rising consumer confidence is considered as positive for the economy because people are feeling more confident about the economy and future. That also means that they are confident about the stability of the earnings and that means they will increase the consumption in the economy. The demand will be greater here.

4) Matt can mow 2 lawns or wash a car in an hour. Matt has a comparative advantage here over Dave and Jack.
Dave can wash 2 cars and mow a lawn in one hour so his comparative advantage is in washing car.

Matt will use his 8 hours to mow 16 lawns. Dave and Jack will use their eight hours in washing car so they will wash total of 24 cars.

In case of 22 lawns, Matt will use his eight hours and Jack will spend his 6 hours to mow lawns.
Dave will use his time to wash 16 cars and jack will add his remaining two hours to wash 2 cars.
The total cars washed will be 18.