Question

Consider the loanable funds market. What event would cause a) real interest rate to increase b)...

Consider the loanable funds market. What event would cause

a) real interest rate to increase

b) real interest rate to decrease

c) quantity of investment to increase

d) quantity of investment to decrease

Business   Economics   
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Answer #1

a) A government deficit will increase the real interest rate in the market, it will decrease the amount of funds available in the market and shift the supply of the loanable fund to the left, that will increase the real interest rate.

b) An increase in the saving will decrease the real interest rate in the market, that will shift the supply of the loanable fund to the right and decrease the real interest rate.

c) A increased consumer confidence in the market will shift the investment demand curve to the right and increase the demand.

d) An increase in the interest rate will decrease the quantity of interest rate in the market.

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