Question

Part 1 Suppose the equilibrium interest rate is 6%. If the current interest rate is 7%...

Part 1

Suppose the equilibrium interest rate is 6%. If the current interest rate is 7% then,

The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will fall
The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will rise
The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will fall
The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will rise

Part 2

Clara buys a bond issued by Twitter, which uses the funds to buy more technology to expand its online presence. In this case,

Clara is saving; Twitter is investing
Clara is investing; Twitter is saving
Clara and Twitter are both investing
Clara and Twitter are both saving
Business   Economics   
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Homework Answers

Answer #1

Part 1: A. The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will fall.
(As interest rate is above equilibrium interest rate so that means supply of loanable funds is greater than its demand and thereby interest rate will fall)

Part 2: Clara and Twitter are both investing
(Buying a bond means Clara is investing and Twitter is also using funds to expand its online presence so it means Twitter is also investing)

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