The financial markets play an important role in channeling funds from savers to borrowers. Which of the following illustartes this function of financial market?  A) Investors purchase assets like real estate and gold from other investors B) Investors purchase securities that are issued by firms and government  C) Investors deposit funds into interest bearing accounts which are then loaned to borrowers  D) Investors purchase capital goods which are used in production by borrowers

The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds.   (Graph in image)   (a. Saving, b. Investment) is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied (a. increases, b. decreases).   Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is (a. greater, b. less) than the quantity of loans demanded, resulting in a (a. surplus, b. shortage) of loanable funds. This would encourage lenders to (a. raise, b. lower) the interest rates they charge, thereby (a. increasing, b. decreasing) the quantity of loanable funds supplied and (a. increasing, b. decreasing) the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of ____ %.

Q2.Using the Domestic Loanable funds market diagram, Explain what happens to Private savings, private investment spending and the interest rate if each of the following events occur. Assume there are no capital inflows or outflows. b. Households save more in anticipation of a downturn in economic activity in the future.

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The table below shows Demand and Supply for loanable fund at given time. Real interest rate Quantity of loanable fund demanded (billion $) Quantity of loanable fund supplied (billion $) 0.01 1000 400 0.02 950 450 0.03 900 500 0.04 850 550 0.05 800 600 0.06 750 650 0.07 700 700 0.08 650 750 0.09 600 800 0.10 550 850 0.11 500 900 0.12 450 950 0.13 400 1000 0.14 350 1050 0.15 300 1100   Instructions: Using excel, find the equilibrium real interest rate and quantity of loanable fund. show the equilibrium on a graph. If this country experiences a recession business cycle phase that decreases the demand for loanable fund by $200 billion. Find the new equilibrium real interest rate and quantity of loanable fund. Show the shift on the graph. list Two factors that shift SLF rightward and two factors that shift DLF rightward What is the meaning of crowding out?…

Complete the following statements. a. Dan saves a portion of his income in an interest-earning account. In the loanable funds market, Dan is    b. John owns a pizzeria and needs to borrow money for a new oven. In the loanable funds market, John is    c. Savers like Dan are likely to save more when the real interest rate    . Therefore, the supply of loanable funds    Look at images for word bank  . d. Borrowers like John are likely to borrow more when the real interest rate     . Therefore, the demand for loanable funds    .

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The main factor that separates wealthy from poor countries is     A.) Differences in productivity     B.) location relative to equator     C.) Different quantities of labor     D.) The strength of financial markets

Over the past decade, some of Japanese saving has been used to finance US investment. That is, the Japanese have been buying US capital assets. Use panel of three graphs to answer the following questions : a. If the Japanese decided they no longer wanted to buy US assets, what would happen in the US market for loanable funds? In particular, what would happen to US interest rates, US saving and US investment? And what happen to NCO ? b. What would happen in the market for foreign currency exchange? In particular, what would happen to the value of the dollar (exchange rate) and the US trade balance? Explain

Provide two examples of changes in the market for loanable funds that can result in a change in the level of interest rates. Explain how and why the interest rate changes based on the loanable fund theory.