Understanding Crowding Out in the Loanable Funds Market

Understanding Crowding Out in the Loanable Funds Market

Assessment

Interactive Video

Economics, Business, Social Studies

10th - 12th Grade

Easy

Created by

Emma Peterson

Used 1+ times

FREE Resource

The video explains the concept of crowding out using the loanable funds market model. It describes how government borrowing can increase demand for loanable funds, leading to higher real interest rates. This rise in interest rates can reduce private sector borrowing and investment, resulting in less capital accumulation and slower economic growth. The video highlights the negative consequences of crowding out on the economy.

Read more

10 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the term used to describe the situation where government borrowing reduces private sector borrowing?

Deflation

Crowding Out

Inflation

Monetary Policy

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In the loanable funds market model, what does the vertical axis represent?

Demand for loanable funds

Supply of loanable funds

Quantity of loanable funds

Real interest rate

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which curve in the loanable funds market model represents the price of borrowing?

Supply curve

Demand curve

Equilibrium curve

Real interest rate curve

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What happens to the demand curve for loanable funds when the government decides to borrow more?

It remains unchanged

It shifts to the right

It shifts to the left

It becomes vertical

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the primary cause of the demand curve shift in the loanable funds market when the government borrows?

Decrease in supply of loanable funds

Increase in supply of loanable funds

Decrease in demand for loanable funds

Increase in demand for loanable funds

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

How does an increase in real interest rates affect private sector borrowing?

Private sector borrows more

Private sector borrows less

No change in private sector borrowing

Private sector borrowing becomes unpredictable

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the result of higher borrowing costs on private investment?

Decreased investment

Investment becomes more efficient

No change in investment

Increased investment

Create a free account and access millions of resources

Create resources
Host any resource
Get auto-graded reports
or continue with
Microsoft
Apple
Others
By signing up, you agree to our Terms of Service & Privacy Policy
Already have an account?