which of the following is a source of demand for loanable funds course hero

Full Answer

What is the source of demand for loanable funds?

(d) Government. The bulk of demand for loanable funds comes from business firms which borrow money for purchasing or making new capital goods, including the building up of inventories (i.e. stocks of goods). Demand for loanable funds for investment purposes by business firms is the most important constituent of total demand for loanable funds.

What determines the price of loanable funds required to purchase capital goods?

The price of the loanable funds required to purchase the capital goods is obviously the rate of interest. It will pay businessmen to demand loanable funds up to the point at which the expected net rate of return on the capital goods equals the rate of interest.

What is the price of loanable funds also known as?

In the loanable funds model, the price of loanable funds is also known as: the suppliers of loanable funds. Today, shoppers "clip coupons" before they go shopping. Explain how these modern coupons are similar and dissimilar to the "coupons" referred to in the bond market.

What is loan-able funds theory of interest?

According to Loan-able Funds Theory, also called the Neo-classical Theory, interest is the price paid for the use of loan-able funds. Like the Classical and Keynesian theories of interest, it is also a demand and supply theory.

What happens to the face value of a currency if the market conditions change?

What is bond amount?

What happens to quantity demanded and quantity supplied?

Does the coupon rate change over the life of a bond?

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Market for loanable funds Flashcards | Quizlet

6. Other things the same, when the interest rate rises, a. people would want to lend more, making the supply of loanable funds increase. b. people would want to lend less, making the supply of loanable funds decrease.

Solved 10. The sources of supply and demand for | Chegg.com

10. The sources of supply and demand for loanable funds. Consider the market for loanable funds in the United States. Which of the following are sources of the supply of loanable funds?Check all that apply.

Ch13 Macroeconomics Flashcards | Quizlet

Study with Quizlet and memorize flashcards containing terms like The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds., The following graph shows the market for loanable funds in a closed economy.

What happens to the face value of a currency if the market conditions change?

if the market conditions change and the rates drop, the face value will not change

What is bond amount?

The amount of money borrowed by a bond issuer

What happens to quantity demanded and quantity supplied?

Surplus; quantity demanded will decrease and quantity supplied will increase

Does the coupon rate change over the life of a bond?

Generally, borrowers benefit from the fact that neither the coupon rate on a bond nor the face value of a bond change over the life of the bond.

Where does the bulk of demand for loanable funds come from?

The bulk of demand for loanable funds comes from business firms which borrow money for purchasing or making new capital goods, including the building up of inventories (i.e. stocks of goods). Demand for loanable funds for investment purposes by business firms is the most important constituent of total demand for loanable funds.

What is the most important source of loanable funds?

Savings by individuals or households constitute the most important source of loanable funds. In the loanable funds theory, savings are looked at in either of these two ways: firstly, an ex-ante savings , i.e., savings planned by individuals at the beginning of a period in the hope of expected incomes and anticipated expenditure on consumption; or secondly, in the Robertson/an sense i.e. savings or the difference between the income of the preceding period (which becomes disposable in the present period) and the consumption of the present period. In either case, the amount saved varies at various rates of interest.

What is demand for loanable funds for consumption?

Generally, the loans for consumption are demanded for buying durable goods like automobiles, refrigerators, radios, television sets, etc. Lower rates of interest will encourage some increase in consumer borrowing. Demand for loanable funds for consumption purposes is shown by the curve ‘C’ (in Fig. 34.3), which is interest-elastic and slopes downwards to the right.

What is the price of loanable funds required to purchase capital goods?

The price of the loanable funds required to purchase the capital goods is obviously the rate of interest . It will pay businessmen to demand loanable funds up to the point at which the expected net rate of return on the capital goods equals the rate of interest. Businessmen will find it profitable to purchase larger amounts of capital goods when the rate of interest (i.e. the price of the loanable funds) declines.

Why is interest rate high?

A high rate of interest is likely to encourage business savings as a substitute for borrowings from the loan market. But these business savings are often demanded for investment purposes by the firms themselves and, therefore, they do not enter the market for loanable funds.

What is interest in loanable funds?

According to Loan-able Funds Theory, also called the Neo-classical Theory, interest is the price paid for the use of loan-able funds. Like the Classical and Keynesian theories of interest, it is also a demand and supply theory. It asserts that rate of interest is determined by the equilibrium between demand for and supply ...

Which is the biggest borrower?

The government is perhaps the biggest borrower, especially in developing countries. In planned development, government undertakes big industrial projects like steel plants, transport undertakings like shipping yards, huge multipurpose projects like the hydro-electric projects. The government also borrows for social welfare activities, and so on. Since the demand for loanable funds for all these purposes is inversely related to the rate of interest, the aggregate demand curve is therefore a downward sloping curve (see curve LD in Fig. 34.3).

What happens to the face value of a currency if the market conditions change?

if the market conditions change and the rates drop, the face value will not change

What is bond amount?

The amount of money borrowed by a bond issuer

What happens to quantity demanded and quantity supplied?

Surplus; quantity demanded will decrease and quantity supplied will increase

Does the coupon rate change over the life of a bond?

Generally, borrowers benefit from the fact that neither the coupon rate on a bond nor the face value of a bond change over the life of the bond.