Question

stion 10 of 21 After reading the given descriptions, please place the correct label by the quadrant on the graph that best describes each person's position in the market for loanable funds. Jolien decides not to take out a loan to fund expanding her grocery store because she projects it will only earn a return of 4%. • Osi closely follows the market for United States Treasury Bonds. He is willing to invest in them anytime the rate of return is 5% or higher, and sees that this is the case. • In order to open a new car wash facility expected to return 13%, Julius secures a loan. • John will shift his stock investments to corporate bonds when they return at least 10%. They do not, so he stays with stocks Interest rate (56)

Answer 1

Jolien is demanding loan. Therefore, Jolien will be on to the demand curve. Since, equilibrium rate is 8% and the expected return is low. Thus, Jolien will be on to the lower half of the demand curve.

Osi is a supplier of fund. Therefore he will be on to the supply curve and as his expected return is 5% that is less than equilibrium. Osi will be on to the lower half of supply curve.

Julius is demanding fund thus he will be on the demand curve and rate of interest is 13%, greater than 8%. Julius will be on to the upper half of the demand curve.

John is supplier of fund thus on to the supply curve. Upper half as rate of interest is greater than equilibrium rate.

Refer the attached picture

Question 10 of 21 Julius; John Jolien Interest rate (5) Osi Quantity of loanable funds (billions of dollars) Answer Bank Jolien John Julius Osi

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