Home X MindTap - Cengage Learning * *Course Hero * *Search Results | Course Hero X + C ng.cengage.com/staticb/ui/evo/index.html? deploymentld=5981412353502464190243042516&elSBN=9780357133576&id=1736030795&snapshotld=3372210& Makenzie v KK CENGAGE | MINDTAP Q Search this course ? My Home Module Six Quiz X Courses 3. Supply and demand for loanable funds Catalog and Study Tools The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. A-Z Rental Options College Success Tips Career Success Tips ? Help 8 Give Feedback 7 Supply bongo A INTEREST RATE (Percent) w A+ N Demand O 100 200 300 600 700 800 LOANABLE FUNDS (Billions of dollars)Home X MindTap - Cengage Learning X Course Hero * *Search Results | Course Hero X + C ng.cengage.com/staticb/ui/evo/index.html? deploymentld=5981412353502464190243042516&elSBN=9780357133576&id=1736030795&snapshotld=3372210& Makenzie v KK CENGAGE | MINDTAP Q Search this course ? My Home Module Six Quiz X Courses Supply Catalog and Study Tools 6 A-Z Rental Options 5 College Success Tips INTEREST RATE (Percent) Career Success Tips 3 ? Help 2 Demand Give Feedback bongo 0 100 200 300 400 500 600 700 800 LOANABLE FUNDS (Billions of dollars) A+ is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is than the quantity of loans demanded, resulting in a of loanable funds. This would encourage lenders to the interest rates they charge, thereby the quantity of loanable funds supplied and the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of % Grade It Now Save & Continue Continue without saving5' Home X ' 6-1 Quiz-ECO X 5\"} MindTap-Ceng X H Course Hero X l u Course Hero X l u Course Hero X l u Course Hero X l u Course Hero X l + v 6 C i ng.cengage.com/staticb/ui/evo/index.html?deploymentld:5981412353502464190243042516&elSBN:9780357'I33576&id=1736030795&snapshotldz337221o& [I] 1'} I] e S Makenzie v 5\" CENGAGE I MINDTAP Q Search this course 0 My Home Module Six Quiz 0 X I Courses 0 1 ' . 100 200 300 400 500 600 700 800 LOANABLE FUNDS (Billions of dollars) Catalog and Study Tools Rental Options College Success Tips , Investment X is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied increases X . Career Success Tips Points: 0/ 1 Help Give Feedback EXP'anatiOm Close Explanation A The supply of loanable funds comes from people who want to save and lend out some of their income. Savers sometimes lend directly by purchasing bonds in financial markets, or they lend indirectly by depositing funds with nancial intermediaries, such as banks, that use the deposits to make loans. The interest rate indicates the return that lenders receive on their saving. The supply of loanable funds curve slopes upward. As the interest rate rises, the return on saving increases, and the quantity of loanable funds supplied increases. As the interest rate falls, saving becomes less attractive and consumption becomes more attractive, so the quantity of loanable funds supplied decreases. Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is less X than the quantity of loans demanded, resulting in a shortage X of loanable funds. This would encourage lenders to raise X the interest rates they charge, thereby decreasing ~/ the quantity of loanable funds supplied and increasing / the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of 5% X . Points: I 0.33/ 1 Explanation: Close Explanation A Based on the graph you are given, at the interest rate of 4.5%, the quantity of loanable funds supplied ($450 billion) is greater than the quantity of loanable funds demanded ($350 billion), resulting in a surplus of loanable funds. Because of the surplus, lenders will face