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Shifts in the Market for Loanable Funds quiz

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  • What happens to the demand for loanable funds if firms' expectations of future profits increase?
    The demand for loanable funds increases, leading to a higher equilibrium interest rate and a greater quantity of funds.
  • How does a decrease in firms' expectations of future profits affect the market for loanable funds?
    It decreases the demand for loanable funds, resulting in a lower equilibrium interest rate and a smaller quantity of funds.
  • What is the effect of an increase in corporate tax rates on the demand for loanable funds?
    An increase in corporate tax rates decreases the demand for loanable funds, lowering both the interest rate and the quantity of funds.
  • How does a decrease in corporate tax rates influence the demand for loanable funds?
    A decrease in corporate tax rates increases the demand for loanable funds, raising both the interest rate and the quantity of funds.
  • What happens to the demand for loanable funds when the government runs a budget deficit?
    The demand for loanable funds increases, causing both the equilibrium interest rate and the quantity of funds to rise.
  • How does a government budget surplus affect the demand for loanable funds?
    A budget surplus decreases the demand for loanable funds, leading to a lower interest rate and a reduced quantity of funds.
  • What are the main sources of supply in the market for loanable funds?
    The main sources are private savings (households) and public savings (government).
  • How do increased incentives for household savings, such as tax benefits, affect the supply of loanable funds?
    Increased incentives raise the supply of loanable funds, lowering the interest rate and increasing the quantity available.
  • What is the effect of decreased incentives for household savings on the supply of loanable funds?
    Decreased incentives reduce the supply of loanable funds, raising the interest rate and decreasing the quantity available.
  • How does a government budget surplus impact the supply of loanable funds?
    A budget surplus increases public savings, which raises the supply of loanable funds, lowers the interest rate, and increases the quantity available.
  • What happens to the supply of loanable funds when the government runs a budget deficit?
    A budget deficit decreases public savings, reducing the supply of loanable funds, raising the interest rate, and lowering the quantity available.
  • Does a change in the interest rate alone shift the supply or demand curve for loanable funds?
    No, a change in the interest rate alone only moves the equilibrium along the curve; it does not shift the supply or demand curve.
  • What is the relationship between savings and the supply of loanable funds?
    Savings, both private and public, make up the supply of loanable funds in the market.
  • How does an increase in available technology that boosts profit expectations affect the loanable funds market?
    It increases the demand for loanable funds, raising both the equilibrium interest rate and the quantity of funds.
  • What is the effect on equilibrium interest rate and quantity when supply of loanable funds increases?
    The equilibrium interest rate decreases and the quantity of loanable funds increases.