Assuming the economy was in equilibrium,use the following information to determine the total amount of funds demanded in the loanable funds market.
A) $0.3 trillion
B) $2.2 trillion
C) $2.5 trillion
D) $3.0 trillion
E) $5.2 trillion

Question

Assuming the economy was in equilibrium,use the following information to determine the total amount of funds demanded in the loanable funds market. 
A) $0.3 trillion 
B) $2.2 trillion 
C) $2.5 trillion 
D) $3.0 trillion 
E) $5.2 trillion

Quizplus · Accepted Answer

From the graph, we can see that the equilibrium interest rate is around 4% and at that point, the quantity of funds supplied is around $2 trillion. The demand curve intersects this point at a level of around $4.5 trillion. However, since the question is asking for the total amount of funds demanded in the loanable funds market, we need to take into account the fact that at higher interest rates, the quantity of funds demanded will be lower. Therefore, we need to find the total funds demanded by summing up the areas under the demand curve at every interest rate level. This comes out to be around $2.5 trillion, which is the best answer choice.

Assuming the Economy Was in Equilibrium,use the Following Information to Determine