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The country is currently experiencing 7 consecutive months of gradually increasing inflation. Experts predict at least another 6 months of the same. Which of the following is likely to occur?

A) Bond demand decreases and loanable funds supply increases

B) Bond demand decreases and loanable funds supply decreases

C) Bond demand increases and loanable funds supply decreases

D) Bond prices increase and interest rates decrease

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Paramjeet Chawla
Paramjeet ChawlaLv8
28 Sep 2019

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Related questions

Federal and state governments will reduce deficit spending by 1.8 trillion this fiscal year. This action will cause which of the following to occur?

a. bond supply to increase

b. bond demand to increase

c. an increase in loanable funds demand

d. an increase in loanable funds supply

e. bond prices decrease

f. interest rates decrease

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

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