Demonstrate using supply and demand graphs 1. Demand for Loanable Funds increase 2. Demand for Loanable...

Demonstrate using supply and demand graphs

1. Demand for Loanable Funds increase

2. Demand for Loanable Funds decrease

3. Supply for Loanable Funds increase

4 Supply for Loanable Funds decrease

5. Demonstrate graphically the Fisher Effect

Draw each graph, label each graph, discuss why the change may occur, and how the change will impact interest rates

Solutions

Expert Solution

1.As consumer spending increases demand for loanable funds increase or rate of return on investment increases which can be due to an increase in income levels or policy changes of government as result there is an increased demand for loanable funds and equillibrium shifts as a result the real interest rates rise in the new equillibrium.

2.As consumer spending decreases or rate of return on investment decreases the demand for loanable fund decreases
which can be due to an increase in income levels or policy changes of government as result there is a decrease in demand for loanable funds and equillibrium shifts as a result the real interest rates falls in the new equillibrium.

3.As central bank loosens monetary policy
Or there is a change in government policies the availability of loanable funds decreases as a result there is a fall in supply and real interest rate rises

4.As central bank tightens monetary policy
Or there is a change in government policies the availability of loanable funds increases as a result there is a rise in supply and real interest rate falls

Rahul Sunny answered 1 year ago

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