Question
1) The loanable funds market Demand and Supply Real Interest rate Loanable funds Loanable funds demanded supplied (percent per year) 0.5 (million Saudi Riyal) 700 600 10 050 650 13 000 700 20 550 750 25 500 800 3.0 450 850 3.5 400 900 a.) Draw the supply and demand balance of the above loanable funds market. What is the equilibrium interest rate and equilibrium loanable funds level? (2 Points) Page 2 of 4/nb.) show with the help of a graph, what happens to the equilibrium interest rate and the equilibrium loanable funds level, when there is an increase in the default risk. (2.5 Points)
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