QUESTION 8 IR LF D\'U LF loanable funds Consider the figure above. The initial e

Question

QUESTION 8 IR LF D'U LF loanable funds Consider the figure above. The initial equilibrium in the loanable funds market in Etopia is at A when the banks in Etopia begin to see an upsurge in deposits This upsurge in bank deposits will result in a new equilibriun at e a point D with a decrease in the interest rate and an increase in the amount of loanable funds borrowed and lent b point A with no change in the interest rate or the amount of loanable fiunds borrowed and lent. c point B with an increase the interest rate and an increase in the amoust of loanable fiunds borrowed and leat o d pont C with no change in the interest rate and an increase in the amoust of loanable finds borrowed and lent to sa

Explanation / Answer

a) Point D with a decrease in the interest rate and an increase in the amount of loanable funds borrowed and lent.

Increase in deposits leads to increase in money supply as banks are able to lend more money. This causes rightward shift of supply curve keeping demand constant. So, equilibrium point changes from A to D.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.