Question

Suppose that, prior to the passage of the Truth in Lending Simplification Act and Regulation Z,...

Suppose that, prior to the passage of the Truth in Lending Simplification Act and Regulation Z, the demand for consumer loans was given by Qdpre-TILSA = 8 -80P (in billions of dollars) and the supply of consumer loans by credit unions and other lending institutions was QSpre-TILSA = 4 + 80P (in billions of dollars). The TILSA now requires lenders to provide consumers with complete information about the rights and responsibilities of entering into a lending relationship with the institution, and as a result, the demand for loans increased to Qdpost-TILSA = 22 -80P (in billions of dollars). However, the TILSA also imposed “compliance costs” on lending institutions, and this reduced the supply of consumer loans to QSpost-TILSA = 2 + 80P (in billions of dollars).

Based on this information, compare the equilibrium price and quantity of consumer loans before and after the Truth in Lending Simplification Act.(Note: Q is measured in billions of dollars and P is the interest rate).

Instruction: Enter your responses for the equilibrium price in percentage terms, and round all responses to one decimal place.

Equilibrium price (interest rate) before TILSA: percent

Equilibrium quantity (in billions of dollars) before TILSA: $ billion

Equilibrium price (interest rate) after TILSA: percent

Equilibrium quantity (in billions of dollars) after TILSA: $ billion

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Qdpre-TILSA = 8 -80P

QSpre-TILSA = 4 + 80P

Equilibrium before:

Qdpre-TILSA =QSpre-TILSA

8-80P= 4+80P

4= 160P

P*= 4/160 x 100= 2.5% (0.025) Equilibrium price Before

Q*= 8-80(0.025)= 8-2= $6 billion Equilibrium quantity

Qdpost-TILSA = 22 -80P

QSpost-TILSA = 2 + 80P

Equilibrium after:

QSpost-TILSA = Qdpost-TILSA

2+80P= 22-80P

160P= 20

P**= 20/160 x 100= 12.5% (0.125) Equilibrium price after

Q**= 2+80(0.125)= 2+10= $12 billion Equilibrium quantity after

Equilibrium price (interest rate) before TILSA: 2.5percent

Equilibrium quantity (in billions of dollars) before TILSA: $6 billion

Equilibrium price (interest rate) after TILSA: 12.5 percent

Equilibrium quantity (in billions of dollars) after TILSA: $ 12 billion

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose the weekly demand for a certain good in thousands of units, is given by the...
Suppose the weekly demand for a certain good in thousands of units, is given by the equation P = 35 - Q, and the weekly supply curve of the good by the equation P = 15 + Q where P is the price in dollars. Finally, suppose a per-unit tax of $6, to be collected from sellers is imposed in this market. Complete the following questions. Note: If necessary round your answers to two decimal places. a) Graph the weekly...
Three students have each saved $1,000. Each has an investment opportunity in which he or she...
Three students have each saved $1,000. Each has an investment opportunity in which he or she can invest up to $2,000. Here are the rates of return on the students’ investment projects: Student Return (Percent) Tim 4 Brian 7 Crystal 15 Assume borrowing and lending is prohibited, so each student uses only personal saving to finance his or her own investment project. Complete the following table with how much each student will have a year later when the project pays...
Topic: Open Market Supply SHANGHAI -- Money markets are often described as the financial system's plumbing....
Topic: Open Market Supply SHANGHAI -- Money markets are often described as the financial system's plumbing. When they work, which is most of the time, hardly anyone notices, but when they get blocked up, it creates quite a stink. That is why China's money market -- in which banks and other financial institutions borrowed some $6.4 trillion from each other last month alone to fund their daily needs -- is becoming one of the world's most important markets to watch....
2. A demand curve indicate a. the maximum willingness to pay for a given quantity b.the...
2. A demand curve indicate a. the maximum willingness to pay for a given quantity b.the consumer's gain from exchange c.the market price of a good or service d. the equilibrum quantity 3. trade permitts countries to a. consume more than they capable of producing b.produce based on their comparative advantage c.specialize more fully d.all of above 4. which of the following dose not impact how elastic supply is? a. whether the supply is local or global b.the share of...
1. Which is the most accurate definition of the study of economics? [1] Distributing surplus goods...
1. Which is the most accurate definition of the study of economics? [1] Distributing surplus goods to those in need. [2] Dealing with affluence in a morally bankrupt world. [3] Using scarce resources to satisfy unlimited human wants. [4] Reducing human wants to eliminate the problem of scarcity. 2. Computer software represents [1] labour. [2] land. [3] capital. [4] entrepreneurship. 3. Suppose you have graduated with a degree in accounting and are offered a job with an accounting firm. But...
Fueling Indonesians: Window of Opportunity or Regret? Kerosene is widely used as cooking fuel by Indonesian...
Fueling Indonesians: Window of Opportunity or Regret? Kerosene is widely used as cooking fuel by Indonesian households, with an annual usage of 10 million Kiloliters. It is a major subsidized fuel for household cooking, where its usage is over sixty percent of the 230 million population. The subsidy program costs the government heavily, where it amounts up to U.S.$4 billion a year. As the practice tends to bleed government expenditures quite heavily, the Indonesian government is embarking on a change...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how the firms resources incompetencies support the given pressures regarding costs and local responsiveness. Describe entry modes have they usually used, and whether they are appropriate for the given strategy. Any key issues in their global strategy? casestudy: Atlanta, June 17, 2014. Sea of Delta employees and their families swarmed between food trucks, amusement park booths, and entertainment venues that were scattered throughout what would...
1. What are the requirements for successful price discrimination? Does this type of dry cleaning qualify?...
1. What are the requirements for successful price discrimination? Does this type of dry cleaning qualify? 2. What are other examples of price discrimination? 3. The effectiveness of price discrimination is a different question than whether businesses should be able to discriminate by price. Is this an issue that deserves regulation, or is it best left to the market? Why Women Pay More From dry cleaning to haircuts, women often pay more than men due to gender pricing. Find out...
What role could the governance of ethics have played if it had been in existence in...
What role could the governance of ethics have played if it had been in existence in the organization? Assess the leadership of Enron from an ethical perspective. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among the top Fortune 500 companies, collapsed in 2001 under a mountain of debt...
Discuss ethical issues that can be identified in this case and the mode of managing ethics...
Discuss ethical issues that can be identified in this case and the mode of managing ethics Enron finds itself in this case. How would you describe the ethical culture and levels of trust at Enron? Provide reasons for your assessment. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT