Exam 7: Finance, Saving, and Investment

-In the above figure, the economy is at point a on the initial demand for loanable funds curve DLF₀. What happens if the real interest rate rises?

The greater a household's the less is its saving.

The idea that a government budget deficit decreases investment is called

A small country is a net foreign borrower and its demand for loanable funds increases. As a result, the equilibrium quantity of loanable funds used in the country _ and the country's foreign borrowing .

As the rises, the supply of loanable funds other things remaining the same.

If the real interest rate is below the equilibrium real interest rate,

Explain the relationship between the real interest rate and the demand for loanable funds. Compare that relationship to the relationship between expected profit and the demand for loanable funds.

The real interest rate is 4 percent a year. When the inflation rate is zero, the nominal interest rate is approximately percent a year; and when the inflation rate is 2 percent a year, the nominal interest rate is approximately percent a year.

The demand for loanable funds curve

A small country is a net foreign borrower and its supply of loanable funds increases. As a result, the equilibrium quantity of loanable funds used in the country _ and the country's foreign borrowing .

If households' disposable income decreases, then

If the nominal interest rate is 8 percent and inflation is 3 percent, what is the real interest rate?

The demand for loanable funds curve is

In the loanable funds market, what variable changes to eliminate a shortage of loanable funds and how is the shortage eliminated?

-The table above shows the loanable funds supply and demand schedules. a) What is the equilibrium real interest rate and the equilibrium quantity of loanable funds? b) If the real interest rate is 4 percent, is there a shortage or surplus? What will happen in the market?

When the inflation rate is negative, the

Between 2008 and 2010, Tim's Gyms wants to expand his business by building 20 new gyms around the country. Suppose that Tim promises to repay the lenders a specific amount on specific dates. This type of funding is

The real interest rate

If two households have the same disposable income in the current year, the household with the

In 2008, the many people became unable to make payments on their mortgages and instead defaulted on them. As a result, the _ of loanable funds curve shifts and real interest rate _ .