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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

Imagine that to preserve the traditional way of life in small fishing villages, a government decides to impose a price floor that will guarantee all fishermen a certain price for their catch.

a. Using the demand and supply framework, predict the effects on the price, quantity demanded, and quantity supplied.

b. With the enactment of this price floor for fish, what are some of the likely unintended consequences in the market?

c. Suggest some policies other than the price floor to make it possible for small fishing villages to continue.

Identify each of the following as involving either demand or supply. Draw a circular flow diagram and label the flows A through F. (Some choices can be on both sides of the goods market.)

a. Households in the labor market

b. Firms in the goods market

c. Firms in the financial market

d. Households in the goods market

e. Firms in the labor market

f. Households in the financial market

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

A price ceiling will have the largest effect:

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

c. substantially above the equilibrium price. d. slightly above the equilibrium price.

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

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.
See all solutions

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