Martket Loanable Funds
Market for Loanable Funds
#1
Add a Supply Curve & show the equilibrium
Draw an increase in Demand (a shift in the curve, not a movement along the curve) & show the new equilibrium
As a result of the increase in demand, theory predicts the interest rate should go _up__
Overall, investment will go __up__
This will make the economy grow more: (quickly / slowly)
The reasons demand would increase:
New technology
Improved investor sentiments (optimism)
Improved government policy towards investment (larger ITC’s)
#2
Add a Demand Curve & show the equilibrium
Draw an decrease in Supply (a shift in the curve, not a movement along the curve) & show the new equilibrium
As a result of the decrease in supply, theory predicts the interest rate should go __up__
Overall, investment will go __down__
This will make the economy grow more: (quickly / slowly)
The reason supply would decrease:
Increased consumer confidence
Decrease consumer patience
Decrease disposable income, maybe
Worsened government policy towards savings
Decrease in government budget surplus (or increase in government budget deficit)
#3 Reasons the real interest rate would increase:
Potential Funds Shortage from a(n):
Increase in Loanable Funds Demand
New technology
Improved investor sentiments (optimism)
Improved government policy towards investment (larger ITC’s)
Decrease in Loanable Funds Supply
Increased consumer confidence
Decrease consumer patience
Decrease disposable income, maybe
Worsened government policy towards savings
Decrease in government budget surplus (or increase in gov. budget deficit)
#4
Fully label above graph.
Add a Supply Curve & show the equilibrium
Draw an decrease in Demand (a shift in the curve, not a movement along the curve) & show the new equilibrium
As a result of the decrease in demand, theory predicts the interest rate should go _down_
Overall, investment will go __down_
This will make the economy grow more: (quickly /
#1
Add a Supply Curve & show the equilibrium
Draw an increase in Demand (a shift in the curve, not a movement along the curve) & show the new equilibrium
As a result of the increase in demand, theory predicts the interest rate should go _up__
Overall, investment will go __up__
This will make the economy grow more: (quickly / slowly)
The reasons demand would increase:
New technology
Improved investor sentiments (optimism)
Improved government policy towards investment (larger ITC’s)
#2
Add a Demand Curve & show the equilibrium
Draw an decrease in Supply (a shift in the curve, not a movement along the curve) & show the new equilibrium
As a result of the decrease in supply, theory predicts the interest rate should go __up__
Overall, investment will go __down__
This will make the economy grow more: (quickly / slowly)
The reason supply would decrease:
Increased consumer confidence
Decrease consumer patience
Decrease disposable income, maybe
Worsened government policy towards savings
Decrease in government budget surplus (or increase in government budget deficit)
#3 Reasons the real interest rate would increase:
Potential Funds Shortage from a(n):
Increase in Loanable Funds Demand
New technology
Improved investor sentiments (optimism)
Improved government policy towards investment (larger ITC’s)
Decrease in Loanable Funds Supply
Increased consumer confidence
Decrease consumer patience
Decrease disposable income, maybe
Worsened government policy towards savings
Decrease in government budget surplus (or increase in gov. budget deficit)
#4
Fully label above graph.
Add a Supply Curve & show the equilibrium
Draw an decrease in Demand (a shift in the curve, not a movement along the curve) & show the new equilibrium
As a result of the decrease in demand, theory predicts the interest rate should go _down_
Overall, investment will go __down_
This will make the economy grow more: (quickly /