What are some extensions to the simplified model of the loan able funds market?
What will be an ideal response?
First, households do not lend directly to businesses. Financial institutions serve as intermediaries in the supply and demand market for loan able funds. Second, the supply of funds can change because of changes in factors that affect the thriftiness of households. Third, the demand for funds can change because of changes in the rate of return on potential investments. Fourth, households and businesses can operate on both sides of the market as both salamanders and suppliers of loan able funds. Government also participates on both sides of the loan able funds market.
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Asset transformation can be described as
A) borrowing long and lending short. B) borrowing short and lending long. C) borrowing and lending only for the short term. D) borrowing and lending for the long term.
In emerging market countries, the deterioration in bank's balance sheets has more ________ effects on lending and economic activity than in advanced countries
A) negative B) positive C) affirming D) advancing