1.It is estimated that the U.S. financial crisis of 2008 led to a loss of $7 tri
ID: 1096202 • Letter: 1
Question
1.It is estimated that the U.S. financial crisis of 2008 led to a loss of $7 trillion in the real estate industry due to the decline in housing prices. The stock market decline brought another $11 trillion in losses, and retirement accounts lost $3.4 trillion.
Describe the effect of these losses on the Real Loanable Funds market: a) What will happen to the demand for real loanable funds? Why? b) What will happen to the supply of real loanable funds? Why? c) What will happen to the equilibrium real risk-free interest rate? Explain and graph your answers.
Explanation / Answer
.It is estimated that the U.S. financial crisis of 2008 led to a loss of $7 trillion in the real estate industry due to the decline in housing prices. The stock market decline brought another $11 trillion in losses, and retirement accounts lost $3.4 trillion.
Describe the effect of these losses on the Real Loanable Funds market: a) What will happen to the demand for real loanable funds? Why? b) What will happen to the supply of real loanable funds? Why? c) What will happen to the equilibrium real risk-free interest rate? Explain and graph your answers.
Answer:- Total deficit is 21.4 trilion . A) the real loanable fund would be in deficit and the inerest would be in higher side
B) The supply of real loanable fund would be lesser side aganist the high demand as the deficit of fund exist in the market
C) Risk free Interest rate would also be in higher side because of fund deficit in market
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