The figure below depicts a loanable funds market for the Uni

The figure below depicts a loanable funds market for the United States. The equilibrium interest rate is R1, and the equilibrium quantity of loanable funds is 1. Changes in financial-market conditions will change the equilibrium interest rate and quantity of loanable funds Match the factors to the right of the figure with the general location of the new equilibrium. For example, if you think the factors cause the demand for loanable funds to increase and the supply of loanable funds to decrease, you would select the top target. Make sure you scroll down to get all the factors. confidence increases, and become less Interest rate s-Savings productivity a greater the population shifts into D Investment an Interest rates in Savings and investment (billions of dollars investor the United States

Solution

A - Investor confidence increases and households become less patient: Top target

B - Capital productivity decreases and a greater percentage of the population shifts into retirement: Investment shifts left while savings shifts left: left target

C - Interest rates in foreign country decreases and investor confidence in the US decreases: Savings shift right and investment shifts left: Bottom target

D - A larger percentage of people move into their prime earning years and capital productivity improves: Savings increase and shift right, investment shifts right: Right target