Refer to the figure below to answer the following questions.
Figure 7.2.3
-In Figure 7.2.3, the real interest rate is 6 percent a year and the economy is on curve DLF.The expected profit rises.With no change in the real interest rate, the new quantity of loanable funds demanded is
A)zero.
B)less than $450 billion.
C)greater than $450 billion.
D)$450 billion.
E)between $300 billion and $450 billion.

Question

Refer to the figure below to answer the following questions.
  Figure 7.2.3
-In Figure 7.2.3, the real interest rate is 6 percent a year and the economy is on curve DLF.The expected profit rises.With no change in the real interest rate, the new quantity of loanable funds demanded is
A)zero. 
B)less than $450 billion. 
C)greater than $450 billion. 
D)$450 billion. 
E)between $300 billion and $450 billion.

Quizplus · Accepted Answer

According to the diagram, an increase in expected profits will shift the demand curve for loanable funds to the right, resulting in a higher quantity of loanable funds demanded. Since there is no change in the real interest rate, the new equilibrium point will be on the same supply curve as before (DLF), but at a higher quantity of loanable funds demanded. This new equilibrium point is indicated by the intersection of the new demand curve and the original supply curve, which lies above $450 billion. Therefore, the correct answer is choice C, greater than $450 billion.

Refer to the Figure Below to Answer the Following Questions