Question

If a country reaches a new trade agreement that will increase export markets for domestic businesses, then the _________ loanable funds shifts to the __________

1. supply of; right
2. supply of, left
3. demand for, left
4. demand for, right

In the loanable funds market, the demand for loanable funds is negatively sloped because of the:

1. inverse relationship between the real interest rate and the quantity demanded of loanable funds.
2. inverse relationship between the real interest rate and the quantity supplied of loanable funds.
3. positive relationship between the real interest rate and the quantity supplied of loanable funds.
4. positive relationship between the real interest rate and the quantity demanded of loanable funds.

Answer 1

In the loanable funds market, the demand for loanable funds is negatively sloped. When a country reaches a new trade agreement that will increase export markets for domestic businesses, it will increase the demand for loanable funds.

Step-by-step explanation:

In the loanable funds market, the demand for loanable funds is negatively sloped because of the inverse relationship between the real interest rate and the quantity demanded of loanable funds. Therefore, the correct answer is option 4 - demand for, right.

When a country reaches a new trade agreement that will increase export markets for domestic businesses, it will attract foreign investment and stimulate economic growth. This will lead to an increased demand for loanable funds, resulting in a shift of the demand curve to the right.