Figure 13-1
-Refer to Figure 13-1. In the figure shown, if the real interest rate is 7 percent, what is the result?
A) surplus of $4000
B) surplus of $2000
C) shortage of $4000
D) shortage of $2000

Question

Figure 13-1 
-Refer to Figure 13-1. In the figure shown, if the real interest rate is 7 percent, what is the result?
A) surplus of $4000 
B) surplus of $2000 
C) shortage of $4000 
D) shortage of $2000

Quizplus · Accepted Answer

The real interest rate is 7 percent, which is higher than the nominal interest rate of 5 percent. This means that the real value of money is increasing over time, so people are more likely to save money and less likely to borrow money. This will lead to a surplus of loanable funds, which is shown in the figure as a point above the equilibrium point.

Figure 13-1 -Refer to Figure 13-1. in the Figure Shown, If the Shown