mework Ch 13 Supply and demand for loanable funds he follow

mework (Ch 13) . Supply and demand for loanable funds he following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable nds, and the downward-sloping blue line represents the demand for loanable funds. Su mand

Solution

Blank 1: Investment is the source of the demand for loanable funds. Investment demand includes business\'s borrowings for purchasing or making of new capital goods,

Blank 2: Increases. Clearly, demand for loanable funds curve is negatively sloped. it is because when the interest rate falls, the businessmen will find it profitable to increase investment and thus the demand for loanable funds increases. At high interest, borrowing money becomes difficult and thus demand gets less.

Blank 3: Greater. As can be seen from figure.

Blank 4: Surplus.  As can be seen from figure.

Blank 5: Lower. Interest rates will go down so that borrowing (demand) increases and savings (supply) decrease

Blank 6: decreasing. Since Supply curve slopes upward, the decrease in interest rate decreases the supply of loanable funds

Blank 7: increasing. Since Demand curve slopes downward, the decrease in interest rate increases demand for loanable funds.

Blank 8: 4 %