Ask Question
BusinessBusiness
17 May, 23:53

For an imaginary economy, when the real interest rate is 7 percent, the quantity of loanable funds demanded is $500 and the quantity of loanable funds supplied is $500. Currently, the nominal interest rate is 9 percent and the inflation rate is 4 percent. Currently,

A. the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise.

B. the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall.

C. the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise.

D. the market for loanable funds is in equilibrium.

+1
Answers (1)
  1. 18 May, 01:23
    0
    The correct answer is option (C) the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise.

    Explanation:

    Solution

    At the interest rate of 7% the market Is in equilibrium where the supply and the demand are same, at a higher rate this the supply will rise for example, the saving will go up and demand will be lower than the supply. But as the inflation rate is 4% then the real interest rate is only 5%.

    At a rate below the equilibrium the demand will be more than the supply and there will be a shortage that will increase the real s interest rate.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “For an imaginary economy, when the real interest rate is 7 percent, the quantity of loanable funds demanded is $500 and the quantity of ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
Paradise Corp. has determined a standard labor cost per unit of $10.20 (1 hour * $10.20 per hour). Last month, Paradise incurred 1,650 direct labor hours for which it paid $16,005. The company also produced and sold 1,700 units during the month.
Answers (1)
1. What is a limited liability company?
Answers (1)
LO 5.3There were 1,000 units in ending inventory after transferring 16,000 units to finished goods inventory. If the beginning inventory was 2,000 units, how many units were started in process? 1,000 2,000 15,000 17,000
Answers (1)
How might foreign investment be problematic for a transitioning economy? A.) Foreign investment can temporarily slow economic growth. B.) It may be difficult to adjust to another nation's influence. C.
Answers (1)
Is the disparate treatment between an employee and an independent contractor a fair one?
Answers (2)
New Questions in Business
Which of the following is a deficiency of using a static planning budget in performance reports? A. The report compares actual revenues and costs at one level of activity with budgeted revenues and costs at the same level of activity B.
Answers (1)
Cindy is concerned because during the past four months her company has experienced difficulty in paying its bills on time. She knows if this continues, the firm will have difficulties in accomplishing its goals. Cindy is concerned with:A.
Answers (1)
Vang Corp.'s stock price at the end of last year was $38 and its earnings per share for the year were $2.30. What was its P/E ratio? Select the correct answer. a. 16.52 b. 16.82 c. 15.92 d. 16.22 e. 15.62
Answers (1)
Real GDP per capita: cannot grow more rapidly than real GDP. cannot decrease if Real GDP increases. necessarily grows more rapidly than real GDP. can increase or decrease when Real GDP increases.
Answers (1)
Which kind of insurance should you have if you live in an apartment? A-Liability B-Renters C-Long-Term Care D-Whole Life
Answers (1)
Home » Business » For an imaginary economy, when the real interest rate is 7 percent, the quantity of loanable funds demanded is $500 and the quantity of loanable funds supplied is $500.
Sign Up Forgot Password?