Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Transcribed Image Text:35. The demand for money: a. Varies inversely with
the interest rate. b. Is the desire to be wealthy. c. Is
controlled by the Federal Reserve. d. Is also referred to
as the loanable funds market.
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- A mortgage 105m is a loan that a person makes to purchase a house. Table 19.11 provides a list of the mortgage interest rate for several different years and the rate of inflation for each of those years. In which years would it have been better to be a person borrowing money from a bank to buy a home? In which years would it have been better to be a bank lending money?arrow_forward11arrow_forward4. The money supply, the loanable funds market, and interest rates Changes in the money supply affect the interest rate through changes in the supply of loans, Real GDP, the price level, and the expected inflation rate. True or False: The income effect describes a change in the interest rate due to a change in the Real GDP. True O False The following graph shows the supply and demand curves in the market for loanable funds. Consider an increase in the Real GDP. INTEREST RATE Adjust the following graph to show the effect of this increase in the Real GDP. QUANTITY OF LOANABLE FUNDS The liquidity effect The price-level effect SLE The income effect The expectations effect DLF ܘ ܘ Which of the following refer to changes that affect the demand for loanable funds but not the supply? Check all that apply. DLF SLF (?)arrow_forward
- Credit Market A. Plot the credit demand and supply curve in a figure. Specify the equi- librium real interest rate (r*) and the equilibrium quantity of credit (B*) in your figure. B. Everything else remaining unchanged, what is likely to happen to the credit market if the following scenario occurs? Separately and graphi- cally show the change of each scenario. Specify the new equilibrium in the credit market. B.1 Businesses in the economy see scope for growth and are planning to expand production in the future. B.2 Households expect a recession in near future. B.3 The government is planning to borrow money from financial in- stitutions for investment in infrastructures.arrow_forwardANSWER 2 AND 3 PLEASEarrow_forward1-Increase in the budget deficit shifts the demand for loanable funds to the right. Select one: a. True b. False 2- The demand for liquid cash in the economy is based on _____________ Select one: a. Interest rates & average prices in the economy b. Credit card facility c. All of the above d. ATM machine availability Clear my choicearrow_forward
- 13. When the government uses its overdraft facilities at the central bank, it ___________ the quantity of moneyin the economy. This is called ___________________ financing. A Increases; deflationaryB Decreases; inflationaryC Decreases; deflationaryD Increases; inflationaryarrow_forwardSolve the attachmentarrow_forwardQUESTION 4 The Yield Curve for a loan relates the interest rate of the loan O a. To the value of future payments To the taxes of the loan Ob. To the fiscal policy C. None of the above d.arrow_forward
- 17)What is a "subprime mortgage," and would a subprime borrower be likely to pay a higher or a lower interest rate than a borrower with a better credit history? Select one: a. Loans granted to borrowers with flawed credit histories; a higher interest rate. b. Loans granted to borrowers with the best credit histories; a lower interest rate. c. Loans granted to borrowers with flawed credit histories; a lower interest rate. d. Loans granted to borrowers with the best credit histories; a higher interest rate.arrow_forward3. Suppose that consumers have a major change in their consumption/savings preferences. As a result of a serious recession they decide to consume less and save more. Illustrate a graph that shows how this would affect the demand and supply for borrowing money with credit.arrow_forwardThe suppliers of loanable funds are Select one: a. people who save money at banks. b. banks who give loans to borrowers. c. central banks (like the Federal Reserve System) that produce currency and coins. d. borrowers who supply loan applications to banks.arrow_forward
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