Show how an increase in the supply of loanable funds and a decrease in the demand for loanable funds can lower the real interest rate and leave the equilibrium quantity of loanable funds unchanged. Draw a demand for loanable funds curve. Label it DLF.. Draw a supply of loanable funds curve. Label it SLF,. Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF,. Draw a curve that shows an increase in the supply of loanable funds. Draw it in such a way that the equilibrium quantity of loanable funds does not change. Label it SLF,. Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2.
Show how an increase in the supply of loanable funds and a decrease in the demand for loanable funds can lower the real interest rate and leave the equilibrium quantity of loanable funds unchanged. Draw a demand for loanable funds curve. Label it DLF.. Draw a supply of loanable funds curve. Label it SLF,. Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF,. Draw a curve that shows an increase in the supply of loanable funds. Draw it in such a way that the equilibrium quantity of loanable funds does not change. Label it SLF,. Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2.
Chapter21: Financial Markets, Saving, And Investment
Section: Chapter Questions
Problem 9P
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