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 110 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

aruss1303

  • Member
  • Posts: 314
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

The most dangerous mercury compound, dimethyl mercury, is so toxic that even a few microliters spilled on the skin can cause death. Mercury has been shown to accumulate in higher amounts in the following types of fish than other types: swordfish, shark, mackerel, tilefish, crab, and tuna.

Did you know?

Drug-induced pharmacodynamic effects manifested in older adults include drug-induced renal toxicity, which can be a major factor when these adults are experiencing other kidney problems.

Did you know?

As many as 20% of Americans have been infected by the fungus known as Histoplasmosis. While most people are asymptomatic or only have slight symptoms, infection can progress to a rapid and potentially fatal superinfection.

Did you know?

Amoebae are the simplest type of protozoans, and are characterized by a feeding and dividing trophozoite stage that moves by temporary extensions called pseudopodia or false feet.

Did you know?

The horizontal fraction bar was introduced by the Arabs.

Carbon Dioxide, Trace Gases, and Climate Change Carbon Dioxide, Trace Gases, and Climate Change
Climate Change Climate Change
Ecological sensitivity to climate change Ecological sensitivity to climate change
Climate change exerts societal impacts and vice versa Climate change exerts societal impacts and vice versa
Tree rings as indicators of environmental change Tree rings as indicators of environmental change
Determine the enthalpy change of this reaction Determine the enthalpy change of this reaction
Video: Effect of the environment on coat color in the Himalayan rabbit Animation

For a complete list of videos, visit our video library