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Chapter 4: Q. 13 (page 104)

Which of the following changes in the financial market will lead to an increase in the quantity of loans made and received: a. a rise in demand b. a fall in demand c. a rise in supply d. a fall in supply

Short Answer

Expert verified

The correct option is A. a rise in demand C. a rise in supply

Step by step solution

01

Step.1 Introduction 

The financial market refers to the market structure where the exchange of funds takes place. The equilibrium quantity of funds and the equilibrium interest rates are determined by the demand & supply of these funds.

02

Step.2 Explanation

An increase in demand would cause the demand curve to move to the right as a result. The equilibrium quantity would increase, and the equilibrium interest rate would also increase. On the other hand, a decrease in demand would cause the demand curve to move to the left, thus causing the equilibrium quantity and equilibrium interest rate to decrease.

An increase in supply would cause a rightward shift in the supply curve, increasing the equilibrium quantity and decreasing the equilibrium interest rate. A decrease in supply would cause a leftward shift in the supply curve, decreasing the equilibrium quantity and increasing the equilibrium interest rate.

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Most popular questions from this chapter

Suppose that a 5% increase in the minimum wage causes a 5% reduction in employment. How would this affect employers and how would it affect workers? In your opinion, would this be a good policy?

Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers.

a. The number of people at the most common ages for home-buying increases.

b. People gain confidence that the economy is growing and that their jobs are secure.

c. Banks that have made home loans find that a larger number of people than they expected are not repaying those loans. d. Because of a threat of a war, people become uncertain about their economic future.

e. The overall level of saving in the economy diminishes.

f. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.

Predict how each of the following events will raise or lower the equilibrium wage and quantity of oil workers in Texas. In each case, sketch a demand and supply diagram to illustrate your answer.

a. The price of oil rises.

b. New oil-drilling equipment is invented that is cheap and requires few workers to run.

c. Several major companies that do not drill oil open factories in Texas, offering many well-paid jobs outside the oil industry.

d. Government imposes costly new regulations to make oil-drilling a safer job.

Identify the most accurate statement.

A price floor will have the largest effect if it is set:

a. substantially above the equilibrium price. b. slightly above the equilibrium price.

c. slightly below the equilibrium price.

d. substantially below the equilibrium price.

Sketch all four of these possibilities on a demand and supply diagram to illustrate your answer

In the labor market, what causes a movement along the supply curve? What causes a shift in the supply curve?
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