Question

Households and firms with savings lend money to banks and other financial institutions. The credit supply curve shows the relationship between the quantity of credit supplied and the real interest rate. The credit supply curve slopes upward because ___________________________.

Answer 1

Answer:higher real interest rate discourages current consumption and higher real interest rate encourages more saving.

Explanation:The supply curve is a graphic representation of the correlation between the cost of a good or service and the quantity supplied for a given period. In a typical illustration, the price will appear on the left vertical axis, while the quantity supplied will appear on the horizontal axis.

Our measure of credit demand is an indicator variable for a firm's need for bank loans decreasing during the period. We measure credit supply using information on whether a firm's loan application was rejected, or the firm received less than 75% of its desired amount.

Credit supply curve is a curve that plots the quantity of credit supplied at different real interest rates.