This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: In the loanable funds market, what will change to eliminate a shortage of loanable funds and how is ... (Read 90 times)

sjones

  • Hero Member
  • *****
  • Posts: 520
on: Jun 29, 2018
In the loanable funds market, what will change to eliminate a shortage of loanable funds and how is the shortage eliminated?
 
  What will be an ideal response?

Question 2

To fight a recession, an appropriate monetary policy would be that the Fed conducts an open market operation that ________ government securities, ________ the federal funds rate, and ________ aggregate demand.
 
  A) buys; lowers; decreases
  B) sells; lowers; increases
  C) sells; raises; decreases
  D) buys; lowers; increases
  E) sells; raises; increases


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

jessofishing

  • Sr. Member
  • ****
  • Posts: 329
Reply #1 on: Jun 29, 2018
Answer to Question 1

The real interest rate changes to eliminate the shortage of funds. A shortage of funds means that businesses want to borrow more than households are willing to loan. (Alternatively, the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied.) The shortage of funds means that some businesses are willing to pay a higher interest rate in order to secure a loan. The real interest rate rises, and as it does so, the quantity of loanable funds demanded decreases (that is, the quantity of investment demanded decreases) and the quantity of loanable funds supplied increases (that is, the quantity of savings increases). Both changes help eliminate the shortage of loanable funds, and so the real interest rate rises until it reaches its equilibrium value.

Answer to Question 2

D


sjones

  • Member
  • Posts: 520
Reply 2 on: Jun 29, 2018
Excellent

shewald78

  • Member
  • Posts: 340
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

Approximately one in four people diagnosed with diabetes will develop foot problems. Of these, about one-third will require lower extremity amputation.

Did you know?

For about 100 years, scientists thought that peptic ulcers were caused by stress, spicy food, and alcohol. Later, researchers added stomach acid to the list of causes and began treating ulcers with antacids. Now it is known that peptic ulcers are predominantly caused by Helicobacter pylori, a spiral-shaped bacterium that normally exist in the stomach.

Did you know?

Glaucoma is a leading cause of blindness. As of yet, there is no cure. Everyone is at risk, and there may be no warning signs. It is six to eight times more common in African Americans than in whites. The best and most effective way to detect glaucoma is to receive a dilated eye examination.

Did you know?

It is believed that the Incas used anesthesia. Evidence supports the theory that shamans chewed cocoa leaves and drilled holes into the heads of patients (letting evil spirits escape), spitting into the wounds they made. The mixture of cocaine, saliva, and resin numbed the site enough to allow hours of drilling.

Did you know?

Though the United States has largely rejected the metric system, it is used for currency, as in 100 pennies = 1 dollar. Previously, the British currency system was used, with measurements such as 12 pence to the shilling, and 20 shillings to the pound.

A severe food shortage occurred in the Netherlands during the “Hunger Winter” of 1944–1945. A severe food shortage occurred in the Netherlands during the “Hunger Winter” of 1944–1945.
The second half of life brings a change from outward to inward concerns and from physical to ... The second half of life brings a change from outward to inward concerns and from physical to ...
Ogburn's Processes of Social Change Ogburn's Processes of Social Change
Fossil fuel emissions and climate change Fossil fuel emissions and climate change
Recent Climate Change Recent Climate Change
Stock Market Tracks Growth in GDP Stock Market Tracks Growth in GDP
Video: TRH/TSH/Thyroid hormone

For a complete list of videos, visit our video library