Figure 21-1

-Refer to Figure 21-1.The loanable funds market is in equilibrium,as shown in the figure above.An increase in the supply of loanable funds could result in which of the following combinations of the real interest rate and quantity of loanable funds at a new equilibrium?

Question

Figure 21-1
 
-Refer to Figure 21-1.The loanable funds market is in equilibrium,as shown in the figure above.An increase in the supply of loanable funds could result in which of the following combinations of the real interest rate and quantity of loanable funds at a new equilibrium?

Quizplus · Accepted Answer

An increase in the supply of loanable funds would shift the supply curve to the right, leading to a new equilibrium at a lower real interest rate and a higher quantity of loanable funds. Option C is the only choice that reflects this scenario, where the new equilibrium occurs at a lower real interest rate of 3 percent and a higher quantity of loanable funds of $150 million. Option A reflects an increase in supply but no change in equilibrium, while options B and D reflect a decrease in supply.

Figure 21-1 -Refer to Figure 21-1.The Loanable Funds Market Is in Equilibrium,as