Question

If the recent financial crisis raises awareness about the dangers of not saving, leading to an increase in overall savings rates across the country, the loanable funds market will experience an increase in the _____ loanable funds and _____ in equilibrium interest rates.

Answer 1

Answer:

the loanable funds market will experience an increase in the SUPPLY loanable funds and DECREASE in equilibrium interest rates.

Explanation:

In economics, national savings = investments. So as national savings increase,  the total amount of loanable funds will increase, which in turn would decrease the interest rates.

In the market for money, suppliers are those households or companies that have excess amount of cash saved and are willing to loan it to individuals or companies that need that money to purchase goods or invest. The price of money is determined by the equilibrium interest rate.

In this case, the supply of money would increase and the price of money (interest rate) would decrease.

Answer 2

Answer:

Supply of; a decrease

Explanation:

If the recent financial crisis raises awareness about the dangers of not saving, leading to an increase in overall savings rates across the country, the loanable funds market will experience an increase in the supply of loanable funds and decrease in equilibrium interest rates because of the saturation of funding or financial institutions.