The table above shows the supply of loanable funds and the demand for loanable funds schedules
a. What is the equilibrium real interest rate and the equilibrium quantity of loanable funds?
b. If the real interest rate is 4 percent, is there a shortage or surplus? What will happen in the market?
a. The equilibrium real interest rate is 6 percent and the equilibrium quantity of loanable funds is $11 billion.
b. If the real interest rate is 4 percent, there is a shortage of loanable funds. The shortage means that the quantity of funds demanded for investment exceeds the quantity supplied, so the real interest rate will rise to its equilibrium of 6 percent.
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In perfect competition, a firm that maximizes its economic profit will sell its good at a price that is
A) below the market price. B) at the market price. C) above the market price. D) below the market price if its supply curve is inelastic and above the market price if its supply curve is elastic.
In a principal-agent problem, if the contract used leads to the maximum of the principal's and agent's combined value (profits, payoffs), we can say that this contract features
A) inefficiency in production, since only the principal's profits should be maximized. B) inefficiency in production, since only the agent's payoffs should be maximized. C) efficiency in production. D) inefficiency in production, since the agent's payoffs should be maximized and the principal's profits should be minimized.