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 136 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
Great answer, keep it coming :)

TheDev123

  • Member
  • Posts: 332
Reply 3 on: Yesterday
:D TYSM

« previous next »
 

Did you know?

According to animal studies, the typical American diet is damaging to the liver and may result in allergies, low energy, digestive problems, and a lack of ability to detoxify harmful substances.

Did you know?

About 600,000 particles of skin are shed every hour by each human. If you live to age 70 years, you have shed 105 pounds of dead skin.

Did you know?

The eye muscles are the most active muscles in the whole body. The external muscles that move the eyes are the strongest muscles in the human body for the job they have to do. They are 100 times more powerful than they need to be.

Did you know?

It is believed that humans initially contracted crabs from gorillas about 3 million years ago from either sleeping in gorilla nests or eating the apes.

Did you know?

Walt Disney helped combat malaria by making an animated film in 1943 called The Winged Scourge. This short film starred the seven dwarfs and taught children that mosquitos transmit malaria, which is a very bad disease. It advocated the killing of mosquitos to stop the disease.

Piercey-Normore and DePriest discovered that some lichens readily change partners. Piercey-Normore and DePriest discovered that some lichens readily change partners.
Change in Drawing Abilities from Early to Middle Childhood Drawings become more realistic as fine m Change in Drawing Abilities from Early to Middle Childhood Drawings become more realistic as fine m
Sleep Requirements Change with Age Sleep Requirements Change with Age
Ecological sensitivity to climate change Ecological sensitivity to climate change
Historical Climate Change "تغير المناخ التاريخي" Historical Climate Change "تغير المناخ التاريخي"
If a graph has the following x-intercepts, which value of x is the instantaneous rate of change ... If a graph has the following x-intercepts, which value of x is the instantaneous rate of change ...
Video: Bone Growth and Remodeling

For a complete list of videos, visit our video library