Question

First​ Call, Inc. is a wireless service provider. It plans to build an assembly plant that...

First​ Call, Inc. is a wireless service provider.
It plans to build an assembly plant that costs ​$14 million if the real interest rate is 3 percent a year.
If the real interest rate is 2 percent a​ year, First Call will build a larger plant that costs ​$16 million.
And if the real interest rate is4 percent a​ year, First Call will build a smaller plant that costs ​$12 million.
Draw points to show the quantity of loanable funds demanded when the real interest rate is
​1)4 percent a year. Label the point 1.
​2)3 percent a year. Label the point 2.
3) 2 percent a year. Label the point 3.
      
Draw First​ Call's demand for loanable funds curve through the points. Label it.
      
11
12
13
14
15
16
17
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Loanable funds (millions of 2009 dollars)
Real interest rate (percent per year)
MAKE THIS INTO A GRAPH please

Homework Answers

Answer #1

The demand for lonable fund curve is shown with the blue line and labeled as 1, 2, 3 as follows

I hope the rest of the data points you have given is for supply of loanable fund as follows. If not, you may ignore the orange line from the above chart. If yes, the equilibrium interest rate = 3% and equilibrium loanable fund = $14 million.

Supply Rate of Interest
11 1.5
12 2
13 2.5
14 3
15 3.5
16 4
17 4.5
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