Question

Which of the following is not true? Banks and other financial intermediaries help make the market for loanable funds fluid O and ease transactions by helping match one person's savings with another person's investment. The market for loanable funds works like any other competitive market with many buyers O and many sellers. The market for loanable funds is comprised of those who want to save the suppliers of funds) and those who want to borrow (the demanders of funds) Where the supply curve for loanable funds and the demand curve for loanable funds intersect determines the size of the budget deficit.

Answer 1

Statements A, B , D are correct as I explained ,, So the ans is C ,,

Answer: C. The market for loanable funds is comprised of those who want to save (the suppliers of funds) and those who want to borrow (the demanders of funds) Where the supply curve for loanable funds and the demand curve for loanable funds intersect determines the size of the budget deficit.

Ans. This statement is not true because where the supply curve and demand curve meet is the equilibrium interest rate, and not the size of budget deficit.

Expl. ::

A. Banks and other financial intermediaries help make the market for loanable funds fluid and ease transactions by helping match one person's savings with another person's investment.

Ans. Investment spending is an important category of real GDP. Not only is it usually the most volatile part of real GDP, but investment spending on physical capital is also an important contributor to economic growth. So, if a firm wants to build a new factory, where does it get the funds to build it? Usually, firms borrow that money.

The market for loanable funds describes how that borrowing happens. The supply of loanable funds is based on savings. The demand for loanable funds is based on borrowing. The interaction between the supply of savings and the demand for loans determines the real interest rate and how much is loaned out.

B. The market for loanable funds works like any other competitive market with many buyers and many sellers.
Ans. The loanable funds market illustrates the interaction of borrowers and savers in the economy. It is a variation of a market model, but what is being “bought” and “sold” is money that has been saved. Borrowers demand loanable funds and savers supply loanable funds. The market is in equilibrium when the real interest rate has adjusted so that the amount of borrowing is equal to the amount of saving.

D. Where the supply curve for loanable funds and the demand curve for loanable funds intersect determines the size of the budget deficit.

Ans. In any market, the price is what suppliers receive and what demanders pay. In financial markets, those who supply financial capital through saving expect to receive a rate of return, while those who demand financial capital by receiving funds expect to pay a rate of return. This rate of return can come in a variety of forms, depending on the type of investment.