The figure above shows the loanable funds market. The equilibrium real interest rate is ________, and the equilibrium quantity of loanable funds is ________.

Question

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We are given a figure of the loanable funds market with two curves: SLF (supply of loanable funds) typically sloping upward, and DLF (demand for loanable funds) sloping downward. The equilibrium occurs where the two curves intersect, which determines both the real interest rate and the quantity of loanable funds.

Option 1: 8 percent; $1.5 trillion
This would place the interest rate higher than where the curves intersect in the diagram. At an 8% rate, the quantity supplied would be larger than the quantity demanded, or the intersection would occur at a higher rate than shown. In other words, this point is inconsistent with the intersection shown in the graph, where the actual equilibrium rate is lower and the equilibrium quantity is around 2 trillion.

Option 2: 4 percent; $1.5 trillion
A 4% rate corresponds to a point on the chart where the DLF and SLF are not crossing; at 4%, the quantities supplied and demanded do not equal 1.5 trillion in the diagram’s intersection. The diagram indicates a higher rate at equilibrium, and 1.5 trillion is associated with a different point on the curves.

Option 3: 4 percent; $2.5 trillion
As with the previous, a 4% rate would align with a different coordiante pair than the equilibrium shown. The quantity 2.5 trillion is larger than the intersection value on the graph, which sits around 2.0 trillion; thus this point does not correspond to equilibrium.

Option 4: 6 percent; $2.0 trillion
This pair matches the intersection shown in the figure: the lines cross at roughly 6% real interest rate and around 2.0 trillion loanable funds. The equilibrium is found where supply equals demand, which is depicted near these coordinates.

Option 5: 0 percent; $3.5 trillion
An interest rate of 0% would imply an extreme condition not consistent with the upward-sloping supply and downward-sloping demand crossing somewhere above 0%. Additionally, 3.5 trillion is far from the intersection quantity indicated by the graph. This point does not reflect equilibrium in the diagram.

ECON 210-003 Homework 9

The figure above shows the loanable funds market. The equilibrium real interest rate is , and the equilibrium quantity of loanable funds is .

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Similar Questions

Consider the Loanable Funds Model: Which of the following is consistent with the graph depicted below?

The supply of loanable funds curve is ___ sloping because _ respond to lower interest rates by ___ their quantity supplied of loanable funds.

A decrease in household savings due to higher consumer spending will generally cause a _ the _for loanable funds.[Fill in the blank]

A policy that induces people to save more shifts a. the supply of loanable funds and raises interest rates. b. the supply of loanable funds and reduces interest rates. c. the demand for loanable funds and raises interest rates. d. the demand for loanable funds and reduces interest rates.

An increase in people's expected future disposable income saving supply, and the supply of loanable funds curve .

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ECON 210-003 Homework 9

The figure above shows the loanable funds market. The equilibrium real interest rate is ________, and the equilibrium quantity of loanable funds is ________.

View Explanation

Log in for full answers

Similar Questions

Consider the Loanable Funds Model: Which of the following is consistent with the graph depicted below?

The supply of loanable funds curve is _____ sloping because _____ respond to lower interest rates by _____ their quantity supplied of loanable funds.

A decrease in household savings due to higher consumer spending will generally cause a ___________ the ___________for loanable funds.[Fill in the blank]

A policy that induces people to save more shifts a. the supply of loanable funds and raises interest rates. b. the supply of loanable funds and reduces interest rates. c. the demand for loanable funds and raises interest rates. d. the demand for loanable funds and reduces interest rates.

An increase in people's expected future disposable income ________ saving supply, and the supply of loanable funds curve ________.

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

The figure above shows the loanable funds market. The equilibrium real interest rate is , and the equilibrium quantity of loanable funds is .

The supply of loanable funds curve is ___ sloping because _ respond to lower interest rates by ___ their quantity supplied of loanable funds.

A decrease in household savings due to higher consumer spending will generally cause a _ the _for loanable funds.[Fill in the blank]

An increase in people's expected future disposable income saving supply, and the supply of loanable funds curve .