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Figure: International Capital Flows
-(Figure: International Capital Flows) Look at the figure International Capital Flows. At an interest rate of 4%, the quantity of loanable funds supplied by U.S. lenders is _____ the quantity of loanable funds demanded by U.S. borrowers.

Question

Use the following to answer questions:
Figure: International Capital Flows 
-(Figure: International Capital Flows) Look at the figure International Capital Flows. At an interest rate of 4%, the quantity of loanable funds supplied by U.S. lenders is _____ the quantity of loanable funds demanded by U.S. borrowers.

Quizplus · Accepted Answer

At an interest rate of 4%, the quantity of loanable funds supplied by U.S. lenders is less than the quantity of loanable funds demanded by U.S. borrowers. This can be seen from the intersection of the supply and demand curves at a point where the interest rate is higher than 4%. At this point, the quantity of loanable funds supplied equals the quantity of loanable funds demanded. However, at an interest rate of 4%, the demand for loanable funds exceeds supply, leading to a shortage and a higher market interest rate.

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