Question

Use the following words to fill in the blanks in the statements below about the market for loanable funds. Choose from: demanded, supplied; left, right; higher, lower

a. A change that makes people want to save less will shift the loanable funds _______ line to the ______. The resulting new equilibrium in the market for loanable funds would be a ______ interest rate and a ______ quantity of funds saved and invested.

Answer 1

supplied , left

higher, lower

Step-by-step explanation:

When people start consuming more and saving less, this would result into lower quantum of funds parked with banks and financial institutions. Due to shortage of funds, the supply of loanable funds in the market would get reduced i.e the supplied line would shift to the left.

This would raise the equilibrium level for loanable funds which would lead to a higher rate of interest i.e funds will be loaned only at a higher rate of interest. Due to this, the quantity of funds saved and invested would be lower.