Not secure naenosgecomystatic/nbyui indeo htm?nbid-585657nbNodeld-21296 MINDTAP

Question

Not secure naenosgecomystatic/nbyui indeo htm?nbid-585657nbNodeld-21296 MINDTAP Christopher Edwards Homework (Ch 26) 1.Supply and demand for loamable fands The following graph shoms the markst for loanable funds in a losed eccncmy. The upward-slopirg orange lin reresents the supply of loanable 4 is the source at the tlemand for laaralle runds·As the interest rate falls. the quantity tt lnanarle fundi diemanded suppose the interest rate is 2.5%. Based on the previous graph, the quantity of loanable funds supplied i: th n the quantty of loans flodnable funds. Ihis would eroturaye lenders to the quartity the interest rates they tharge, thereby lai nalle funds demanded. ma-ing the marker terward

Explanation / Answer

INTEREST RATE is the source of the demand for loable funds, as the interest rate falls, the quantity of loanable funds demanded INCREASES.

because interest rate and demand for loanable funds has a inverse relationship. thats why when interest rises, quantity demanded falls and vice-versa

suppose the interest rate is 3.5% . bases on the previos graph, the quantity of loable funds supplied is LESS THAN than the quantity of loans demanded , resulting in a SHORTAGE of a loanable funds. this would encourage lenders to increase the interest rate they charge, thereby increase the quantity of loanable funds supplied and decrease the quantity of loanable funds demanded , moving the market toward the equilbruim interest rate at 4%

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