Investment Demand and Loanable Funds

The video tutorial by Jacob Reed from reviewecon.com covers the loanable funds market, explaining the demand and supply curves, their shifters, and how they determine equilibrium. It discusses the impact of shifts in these curves on real interest rates and investment quantities. The concept of crowding out, where increased government borrowing affects private investment, is also explored. The tutorial aims to help students understand these concepts for their microeconomics or macroeconomics exams.

Which factor can cause a rightward shift in the investment demand curve?

• Decrease in corporate taxes

• Increase in interest rates

• Decrease in economic confidence

• Increase in consumer savings

What is primarily included in the demand for loanable funds?

• Foreign exchange

• Consumer savings

• Investment demand

• Government spending

What happens to the savings supply curve when disposable income increases?

• It becomes vertical

• It shifts to the right

• It becomes horizontal

• It shifts to the left

What is the effect of a financial capital inflow on the supply of loanable funds?

• No effect on the supply

• Increases the supply

• Makes the supply curve steeper

• Decreases the supply

What occurs when the real interest rate is below equilibrium in the loanable funds market?

• Decrease in investment

• No change in loanable funds

• Shortage of loanable funds

• Surplus of loanable funds

How does an increase in the savings supply affect the real interest rate?

• Increases the real interest rate

• Makes the real interest rate indeterminate

• Decreases the real interest rate

• No effect on the real interest rate

What is the result of a double shift in both the supply and demand curves?

• Quantity is indeterminate, real interest rate decreases

• Both real interest rate and quantity increase

• Real interest rate is indeterminate, quantity decreases

• Both real interest rate and quantity are indeterminate

What is the crowding out effect in the context of the loanable funds market?

• Increase in foreign investment due to government borrowing

• Decrease in private investment due to government borrowing

• No effect on private investment

• Increase in private investment due to government borrowing

How does government borrowing affect the supply of loanable funds?

• Increases the supply

• Makes the supply curve steeper

• Decreases the supply

• No effect on the supply

What happens to the real interest rate when there is a decrease in government borrowing?

• It decreases

• It becomes indeterminate

• It remains the same

• It increases