Problem
Table 4.6 shows the amount of savings and borrowing in a market for loans to purchase homes, measured in millions of dollars, at various interest rates. What is the equilibrium interest rate and quantity in the capital financial market? How can you tell? Now, imagine that because of a shift in the perceptions of foreign investors, the supply curve shifts so that there will be $10 million less supplied at every interest rate. Calculate the new equilibrium interest rate and quantity, and explain why the direction of the interest rate shift makes intuitive sense.
|
Interest Rate
|
Qs
|
Qd
|
|
5%
|
130
|
170
|
|
6%
|
135
|
150
|
|
7%
|
140
|
140
|
|
8%
|
145
|
135
|
|
9%
|
150
|
125
|
|
10%
|
155
|
110
|
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.