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 132 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
YES! Correct, THANKS for helping me on my review

mammy1697

  • Member
  • Posts: 341
Reply 3 on: Yesterday
Wow, this really help

« previous next »
 

Did you know?

The heart is located in the center of the chest, with part of it tipped slightly so that it taps against the left side of the chest.

Did you know?

Acetaminophen (Tylenol) in overdose can seriously damage the liver. It should never be taken by people who use alcohol heavily; it can result in severe liver damage and even a condition requiring a liver transplant.

Did you know?

There are more bacteria in your mouth than there are people in the world.

Did you know?

As many as 28% of hospitalized patients requiring mechanical ventilators to help them breathe (for more than 48 hours) will develop ventilator-associated pneumonia. Current therapy involves intravenous antibiotics, but new antibiotics that can be inhaled (and more directly treat the infection) are being developed.

Did you know?

Atropine, along with scopolamine and hyoscyamine, is found in the Datura stramonium plant, which gives hallucinogenic effects and is also known as locoweed.

As a result of this change, deoxyhemoglobin S As a result of this change, deoxyhemoglobin S
Earth Affects People; People Change Earth Earth Affects People; People Change Earth
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.
Natural Causes of Climate Change Natural Causes of Climate Change
Global Climate Change Global Climate Change
(left) Urine sample from an unaffected person does not change color upon exposure to air. (right) Ur (left) Urine sample from an unaffected person does not change color upon exposure to air. (right) Ur
Video: Dorsal Recumbent Position

For a complete list of videos, visit our video library