Refer to Figure 10-6. The loanable funds market is given in the figure above. If the current real interest rate is 5 percent, which of the following is true?
A) The quantity of loanable funds being demanded in the market is less than $90 million.
B) The loanable funds market is in equilibrium.
C) There is a surplus of loanable funds in the market.
D) There is a shortage of loanable funds in the market.
C
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Give an example not in the text of how price ceilings can lead to a shortage.
What will be an ideal response?
Suppose Country A, a labor-abundant country, produces only wheat and cloth. The following equations illustrate the prices and costs of wheat and cloth in the country. The numbers indicate the amounts of labor and land needed to produce a unit of wheat and cloth. 'W' is the wage rate and 'r' is the rental rate of land.Price of wheat = 1w + 2rPrice of cloth = 2w + 1rIf the initial prices of wheat and cloth are $3 per unit, the labor cost per unit of wheat output is ________ and the rental cost per unit of wheat output is
A. $1; $2. B. $2; $1. C. $2; $3. D. $3; $2.