AP Macro - Loanable Funds Market

Which of the following is NOT true in regards to the loanable funds market?

• The government makes up the supply of loanable funds

• Savers make up the supply of laonable funds

• Borrowers of loanable funds include households, businesses, and government

• The laws of supply and demand impact real interest rates

What is the relationship between real interest rates and quantity of loanable funds supplied?

• It is a direct relationship, meaning the higher the real interest rate, the less loanable funds supplied

• It is a direct relationship, meaning the higher the real interest rate, the more loanable funds supplied

• It is a indirect relationship, meaning the higher the real interest rate, the less loanable funds supplied

• It is a indirect relationship, meaning the higher the real interest rate, the more loanable funds supplied

Which of the following belongs on the Y-axis of the loanable funds graph?

• nominal interest rate

• real interest rate

• price level

• real GDP

The foreign demand for US goods increases. This will cause which of the following changes to the US loanable funds market?

• an increase in demand for loanable funds

• an increase in supply of loanable funds

• a decrease in demand for loanable funds

• a decrease in supply of loanable funds

The Brazilian government passes a large spending bill that will be funded through defecit spending. Which answer best describes the impact this will have on the Brazilian loanable funds market?

• supply of loanable funds will increase; real interest rate will decrease

• supply of loanable funds will decrease; real interest rate will decrease

• demand for loanable funds will increase; real interest rate will decrease

• demand for loanable funds will increase; real interest rate will increase

Which of the following is a likely explanation for this change in the loanable funds market?

• an increase in government deficit spending

• households fear an economic recession in the near future and begin spending less

• foreign demand for the country's goods increases

• the discount rate increases, meaning it is more expensive for banks to borrow from the central bank

Show the impact of the following scenario on the loanable funds market: Business become more optimistic the economic outlook in the near future.