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Fred is considering expanding his dress shop. Which of the following will happen if interest rates rise? Select one:

a. He is more likely to expand. This illustrates why the supply of loanable funds slopes upward.

b. He is less likely to expand. This illustrates why the demand for loanable funds slopes downward.

c. He is less likely to expand. This illustrates why the supply of loanable funds slopes downward.

d. He is more likely to expand. This illustrates why the demand for loanable funds slopes upward.

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Richa Arora
Richa AroraLv10
11 Feb 2021

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Related questions

Supply and demand for loanable funds

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.

(Saving/Investment) is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded (decreases/increases) .

Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is (Greater/Less) than the quantity of loans demanded, resulting in a (Surplus/Shortage) of loanable funds. This would encourage lenders to (Raise/Lower) the interest rates they charge, thereby (Increasing/Decreasing) the quantity of loanable funds supplied and (Increase/Decrease) the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of ______%.

 

 

The following graph shows the market for loanable funds in a closed economy. The upward-sloping line shows the supply of loanable funds and the downward sloping line shows the demand for loanable funds.

(Saving/Investment) is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded (decreases/increases) .

Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is (Greater/Less) than the quantity of loans demanded, resulting in a (Surplus/Shortage) of loanable funds. This would encourage lenders to (Raise/Lower) the interest rates they charge, thereby (Increasing/Decreasing) the quantity of loanable funds supplied and (Increase/Decrease) the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of ______%.

 

as the interest rate falls, the quantity of loanable funds demanded

QUESTION 11

If the demand for investment loans rises, this could be the result of

the discovery of new and better roundabout methods of production.

a lower rate of time preference in society.

a lower interest rate.

a higher interest rate.

a and c

1 points

QUESTION 12

Which of the following statements is true?

All persons have a high rate of time preference.

People with a high rate of time preference are more likely to be borrowers than people with a low rate of time preference.

People with a high rate of time preference are more likely to be lenders than people with a low rate of time preference.

A high interest rate is the cause of a high rate of time preference.

none of the above

1 points

QUESTION 13

Which of the following statements is true?

The nominal interest rate is always higher than the real interest rate since the nominal interest rate equals the real interest rate plus the expected inflation rate.

The nominal interest rate is always lower than the real interest rate since the nominal interest rate equals the real interest rate minus the expected inflation rate.

The nominal interest rate can equal the real interest rate, but to do so the expected inflation rate must be zero percent.

It is the nominal interest rate-not the real interest rate-that matters to borrowers.

1 points

QUESTION 14

If there is an increase in the expected inflation rate, then,

the supply and demand for loanable funds will decrease.

the supply and demand for loanable funds will increase.

the supply of loanable funds will decrease, and the demand for loanable funds will increase.

the supply of loanable funds will increase, and the demand for loanable funds will decrease.

1 points

QUESTION 15

If suddenly a 4 percent inflation rate (instead of a zero percent inflation rate) is expected by both suppliers and demanders in the loanable funds market, then

the demand for loanable funds curve will shift rightward, and the supply of loanable funds curve will shift leftward.

the demand for loanable funds curve will shift leftward, and the supply of loanable funds curve will shift rightward.

both the demand for loanable funds curve and the supply of loanable funds curve will shift leftward.

both the demand for loanable funds curve and the supply of loanable funds curve will shift rightward.

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