Economics Questions

Question 1: As the economy enters an expansion, there will be

a) A leftward shift in the supply of loanable funds curve

b) A leftward shift in the demand for loanable funds curve

c) An increase in the supply of loanable funds

d) a decrease in the nominal interest rate

Question 2

Part 1

Suppose the economy is currently in a recession and that economic forecasts indicate that the economy will soon enter an expansion.

As a?result, expected profitability of new investment in plant and equipment increases and both the demand for and supply of loanable funds increase.

The initial loanable funds market is described by the demand for loanable funds curve D1, and the supply of loanable funds curve, S1.

draw the demand or the supply curve if the economic forecasts indicate that the?economy, which is currently in?recession, will soon enter an expansion. Assume that the borrowers and lenders believe the forecast is accurate. Properly label each line.

Carefully follow the instructions?above, and only draw the required objects.

Use the diagram to the right to answer the following question

When borrowers and lenders believe that the forecast of economic expansion is?accurate,

the equilibrium real interest rateincreases

the equilibrium quantity of loanable funds increases

and the quantity of saving and investment increases

Instructions

Draw the lines on ECON Chap 6 Q7 (2).png based on the above information

Loanable Funds Market 51 Real interest rate E D1 L1 Loanable funds (billions of dollars per year)