consider the market for loanable funds. graphically illustrate the impact on the equilibrium interest rate and the equilibrium quantity of funds saved and invested in each of the following scenarios. instructions: drag the appropriate line in the correct direction to show the effect on the equilibrium interest rate and the equilibrium quantity of funds saved and invested. a. due to warning signs in the economy, such as an inverted yield curve, household confidence about growth in the economy diminishes and workers start fearing that they may lose their jobs in the coming months. this will: multiple choice 1 lower the equilibrium interest rate and increase the quantity of funds saved and invested. lower the equilibrium interest rate and decrease the quantity of funds saved and invested. raise the equilibrium interest rate and increase the quantity of funds saved and invested. raise the equilibrium interest rate and decrease the quantity of funds saved and invested. b. a recession has taken ahold in the economy, with increased unemployment and a reduction in income (gdp) as consequences. this will: multiple choice 2 raise the equilibrium interest rate and increase the quantity of funds saved and invested. lower the equilibrium interest rate and decrease the quantity of funds saved and invested. raise the equilibrium interest rate and decrease the quantity of funds saved and invested. lower the equilibrium interest rate and increase the quantity of funds saved and invested. c. numerous firms remain concerned about growth prospects in the economy. this will: multiple choice 3 lower the equilibrium interest rate and increase the quantity of funds saved and invested. lower the equilibrium interest rate and decrease the quantity of funds saved and invested. raise the equilibrium interest rate and decrease the quantity of funds saved and invested. raise the equilibrium interest rate and increase the quantity of funds saved and invested. d. a reduction in the cost of acquiring new physical capital creates many new profitable opportunities for firms. this will: multiple choice 4 lower the equilibrium interest rate and decrease the quantity of funds saved and invested. raise the equilibrium interest rate and decrease the quantity of funds saved and invested. raise the equilibrium interest rate and increase the quantity of funds saved and invested. lower the equilibrium interest rate and increase the quantity of funds saved and invested. e. the government decides to increase government purchases (g), which increases the size of the budget deficit. this will: multiple choice 5 lower the equilibrium interest rate and decrease the quantity of funds saved and invested. lower the equilibrium interest rate and increase the quantity of funds saved and invested. raise the equilibrium interest rate and decrease the quantity of funds saved and invested. raise the equilibrium interest rate and increase the quantity of funds saved and invested.
