TRUE OR FALSE? In the market for loanable funds, legislation that prohibits lenders from charging more...
TRUE OR FALSE? In the market for loanable funds, legislation that prohibits lenders from charging more than a
specified interest rate on certain types of loans can lead to lower valued projects being funded
at the expense of higher-valued projects.
Homework Answers
Answer: False
Prohibiting high interest rates do not fund lower valued projects at the expense of higher-valued projects. Infact, optimum interest rates on loans maintains the stability in the market for loanable funds.
Let us understand how,
If the interest rate increases, then the demand for loans shall decrease causing fall in supply.
Similarly, if the interest rate decreases, then the demand for loans shall increase causing rise in supply.
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TRUE OR FALSE? In the market for loanable funds,
legislation that prohibits lenders from charging more...
1. Suppose the government restricts foreign lenders from lending money in the US loanable funds market....
1. Suppose the government restricts foreign lenders from lending money in the US loanable funds market. What happens to the equilibrium interest rate in the US? 2. Suppose credit card companies encourages households to spend more. What happens to the equilibrium quantity of loans in the loanable funds market?
The following graph shows the market for loanable funds in a closed economy.
The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. Saving is the source of the supply of loanable funds. As the real interest rate rises, the quantity of loanable funds demanded decreases Suppose the real interest rate is 7%. In this case, the quantity of loanable funds supplied is greater than the quantity of loans...
4. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy.
4. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loan funds _______ is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded _______ Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is _______ than...
3. Supply and demand for loanable funds Aa Aa The following graph shows the market for...
3. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds.Investment is 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 7%. In this case, the quantity of loanable funds supplied is greater than the quantity of...
4. Supply and demand for loanable funds alog The following graph shows the market for loanable...
4. Supply and demand for loanable funds alog The following graph shows the market for loanable funds in a closed economy. The upward sloping range line represents the supply of loanable funds, and the downward sloping blue line represents the demand for loanable funds ters ans access Tips ccess Tips 10 FOR YOU Suppo Tools NTEREST RATL Pent ar Principles of wand edback 100 LOANABLE FUNDS INTEREST RATE (Percent) Demand . 100 200 300 400 500 600 700 80000 1000...
In a closed economy’s market for loanable funds, an increase in national savings caused by people’s...
In a closed economy’s market for loanable funds, an increase in national savings caused by people’s decisions to save more will (increase, reduce, leave unchanged) the supply of loanable funds. It will also result in a (higher, lower, unchanged) real interest rate and (more, less, the same amount of) investment spending. (3 points; 1 point each)
In the loanable funds market, savers supply funds for loans to borrowers. Because this market is...
In the loanable funds market, savers supply funds for loans to borrowers. Because this market is crucial to the economy, it is important that you understand what factors cause the demand for and supply of loanable funds to change. Match four of the five factors listed on the right with the appropriate diagram on the left. One factor does not match A Stock prices increase © People become less patient © Because of new technologies the productivity of machinery Increases...
12:037 final exam.pdf d wary of future downturns, and shift the supply curve for kanable funds...
12:037 final exam.pdf d wary of future downturns, and shift the supply curve for kanable funds to the left 23. Since the future holds more uncertainty over longer periods of time, lenders generally want a higher interest rate for loans over a longer period ba lower interest rate for loans over a longer period a higher interest rate for loans over a shorter period d. None of these is true 24. When a borrower fails to pay back a lon...
1. Th e supply of loanable funds: comes from households that consume all of their income...
1. Th e supply of loanable funds: comes from households that consume all of their income results from the desire to accumulate wealth for retirement or for major future expenditures c. is inversely related to the interest rate d. does not depend on the interest rate 2. Both consumer demand and investment demand for loanable funds will be: directly related to the interest rate inversely related to the interest rate c. unrelated to the interest rate A decrease in expected...
Q.1 (15 points) Assume that the equilibrium in the loanable funds market is at an interest...
Q.1 (15 points) Assume that the equilibrium in the loanable funds market is at an interest rate of 5% and the total quantity of loans is $650 billion. In addition, in this initial situation, the government is borrowing $80 billion per year to fund the budget deficit. (a) How much is the private investment in this initial equilibrium? (b) Now the government increases spending by $320 billion per year and finances this spending completely with additional borrowing. (i) Draw a...
4. Supply and demand for loanable funds alog The following graph shows the market for loanable funds in a closed economy. The upward sloping range line represents the supply of loanable funds, and the downward sloping blue line represents the demand for loanable funds ters ans access Tips ccess Tips 10 FOR YOU Suppo Tools NTEREST RATL Pent ar Principles of wand edback 100 LOANABLE FUNDS INTEREST RATE (Percent) Demand . 100 200 300 400 500 600 700 80000 1000...
In the loanable funds market, savers supply funds for loans to borrowers. Because this market is crucial to the economy, it is important that you understand what factors cause the demand for and supply of loanable funds to change. Match four of the five factors listed on the right with the appropriate diagram on the left. One factor does not match A Stock prices increase © People become less patient © Because of new technologies the productivity of machinery Increases...
12:037 final exam.pdf d wary of future downturns, and shift the supply curve for kanable funds to the left 23. Since the future holds more uncertainty over longer periods of time, lenders generally want a higher interest rate for loans over a longer period ba lower interest rate for loans over a longer period a higher interest rate for loans over a shorter period d. None of these is true 24. When a borrower fails to pay back a lon...
1. Th e supply of loanable funds: comes from households that consume all of their income results from the desire to accumulate wealth for retirement or for major future expenditures c. is inversely related to the interest rate d. does not depend on the interest rate 2. Both consumer demand and investment demand for loanable funds will be: directly related to the interest rate inversely related to the interest rate c. unrelated to the interest rate A decrease in expected...
Q.1 (15 points) Assume that the equilibrium in the loanable funds market is at an interest rate of 5% and the total quantity of loans is $650 billion. In addition, in this initial situation, the government is borrowing $80 billion per year to fund the budget deficit. (a) How much is the private investment in this initial equilibrium? (b) Now the government increases spending by $320 billion per year and finances this spending completely with additional borrowing. (i) Draw a...
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