EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 14, Problem 7RQ
To determine
To explain: Reason to reconcile
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Suppose that the demand for laonable funds for car in the Milwaukee area is $11million per month at an interest rate of 10 percent per year, $12million at an interest rate of 9 percent per year, $13million at an interest rate of 8 percent per year and so on. a. If the supply of loanable funds is fixed at $17million, what will be the equilibrium interest rate?
b. If the government imposes a usury law and says that car loans cannot exceed 3 percent per year, how big will the monthly shortage (or excess demand) for car loans be?
c. How big will the monthly shortage for car loans be if the usury limit is raised to 7 percent per year?
Use the following graph (shifts in the supply of loanable funds) for the next five questions.
Interest 6%-
S3
rate
5-
3
S₁
S₂
$200 250 300 350 400
Savings
(billions of dollars)
Assuming the supply of loanable funds is at S1, which of the following represents an increase in the number of
retired people in a nation?
no change
O a shift to $3
a movement down and to the left along S1
a movement up and to the right along S1
O a shift to S2
Explain why there is a negative relationship between interest rate and quantity demand of capital
And why there is a positive relationship between interest rate and quantity supply of capital.
Chapter 14 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 14.3 - Prob. 1MQCh. 14.3 - Prob. 2MQCh. 14.4 - Prob. 1MQCh. 14.4 - Prob. 1TTACh. 14.4 - Prob. 2TTACh. 14.5 - Prob. 1TTACh. 14.5 - Prob. 2TTACh. 14.5 - Prob. 1MQCh. 14.6 - Prob. 1TTACh. 14.6 - Prob. 2TTA
Ch. 14.6 - Prob. 1MQCh. 14.6 - Prob. 2MQCh. 14.6 - Prob. 1.1TTACh. 14.6 - Prob. 2.1TTACh. 14 - Prob. 1RQCh. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQCh. 14 - Prob. 14.1PCh. 14 - Prob. 14.2PCh. 14 - Prob. 14.3PCh. 14 - Prob. 14.4PCh. 14 - Prob. 14.5PCh. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Prob. 14.8PCh. 14 - Prob. 14.9PCh. 14 - Prob. 14.10P
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Similar questions
- Graphically Show each scenario of the market for loanable funds and graph the supply and demand for each of the 4 scenarios. Draw the shift occurring (Supply or Demand) and explain what happens to the equilibrium interest rate in for each of the 4 scenarios 1. A breakthrough in medical technology results in many hospitals wanting to buy new equipment. 2. The government budget deficit is reduced by 50%. 3. Foreign investors buy residential property in the United States. 4. People around the world are worried about financial stability in their countries and choose to move their wealth to U.S. financial markets.arrow_forward4.5arrow_forwardSuppose that the demand for loanable funds for car loans in the Milwaukee area is $10 million per month at an interest rate of 10 percent per year, $11 million at an interest rate of 9 percent per year, $12 million at an interest rate of 8 percent per year, and so on. If the supply of loanable funds is fixed at $15 million, what will be the equilibrium interest rate? If the government imposes a usury law and says that car loans cannot exceed 3 percent per year, how big will the monthly shortage (or excess demand) for car loans be? What if the usury limit is raised to 7 percent per year?arrow_forward
- Please answer everything. Define each of the following loan terms, and explain how they are related to one another: the prime rate, the rate on commercial paper, the simple interest rate on a bank loan calling for interest to be paid monthly, and the rate on an installment loan based on add-on interest. If the stated rate on each of these loans was 5%, would they all have equal, effective annual rates? Explain. Kindly SKIP if you're not diligent to answer them. Thank you!arrow_forwardAnalyze the impacts of the economy entering a time of expansion (i.e. "good times") on the market for loanble funds. (Assume that expectations about the future don't change.) Because of the expansion, equilibrium interest rates will and the equilibrium quantity of loanable funds will O decrease ; rise, fall, or not change (ambiguous effect) O increase ; decrease O increase ; rise, fall, or not change (ambiguous effect) rise, fall, or not change (ambiguous effect) ; increase O rise, fall, or not change (ambiguous effect) ; decreasearrow_forward8- Describe how the following statements affect either the supply or the demand for loanable funds. For each statement below, do the following: Explain whether the event affects either the demand or the supply of loanable funds. Describe how the statement will affect the equilibrium interest rate and quantity of loanable funds. Draw a graph to demonstrate each answer. Please remember to label each part of the graph. Indicate the change in the interest rate and the quantity of loanable funds on your graph. Analyze each event independently. (Hint: Review the slides and recordings of Lecture 4 for similar graphical analysis). Statements: a) "The national-level saving rate is important from a macroeconomic perspective, in the sense that higher savings tend to strengthen the economy over the long run." b) “Slow-trend growth is reducing the opportunities for profitable long-term investments. The recent downturn in business investment was less of a cyclical blip than a sign of things to…arrow_forward
- 4.4 how am i supposed to show this, are there going to be two lines crossing over eachother?arrow_forwardework (CIT 25) This question addresses the impact of saving on an economy by examining what happens if tax laws change to induce saving and how changes in tax laws can discourage saving. The following graph shows the market for loanable funds. Show the impact of a change in the tax law that successfully encourages saving by shifting either the demand curve (D), the supply curve (S), or both. (?) S INTEREST RATE F2 F3 11 F4 d F5 COL F6 % 。。。。 O F7 A F8 & & F9 * F10 F11 ) F12 2 Fn Lock D Insert Prt Sc + X 1:44 PM 4/29/2022 (2 D Baarrow_forwardIncluded the information in the picsarrow_forward
- 4.2 and 4.3 pleasearrow_forwardUse the loanable funds market to illustrate the effect of the following events on the equilibrium. Illustrate the effects on the interest rate and quantity of investment-savings a) The proportion of retired people in the population goes up. Think that usually retired people generally save less than working people at any interest rate. b) At any given interest rate, consumers decide to save more (assume the budget balance is zero). c) At any given interest rate, businesses become very optimistic about the future profitability of investment spending (assume the budget balance is zero).arrow_forwardWhat is market for loanable funds? Use the analysis of market for loanable fund to analyse the impact of saving incentives and government budget (deficits) toward the interest rate and quantity of loanable funds! (Explain your answer by using graphical approach)arrow_forward
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