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Ch10SGH.docx - Chapter 12 Study Guide Name:_Prd:_ 10.1 Key...

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Chapter 12 Study GuideName:_____________________Prd:______10.1Key Terms:Interest rate– annual interest expressed as a percentage of the amount borrowed or saveddemand for loans curve– a downward-sloping curve showing the negative relationshipbetween the interest rate and the quantity of loans demanded, other things constantsupply of loans curve– an upward-sloping curve showing the positive relationship between theinterest rate and the quantity of loans supplied, other things constantMarket for loans– the market that brings together borrowers (the demanders of loans) andsavers (the suppliers of loans) to determine the market interest rateequilibrium interest rate- the only interest rate at which the quantity of loans demanded equalsthe quantity of loans suppliedThink Critically:1.Why couldn’t you open up a pizza restaurant tomorrow if you wanted to?
2.Why were many more consumers willing to buy automobiles when manufacturers offeredspecial zero percent interest rates?
3.Why do most people borrow funds to purchase a home or an automobile rather than waituntil they can afford to pay cash?
4.What happens to the demand for loans that causes the equilibrium interest rate to fallduring a downturn in the economy?
Graphing Exercise:5.Home mortgage interest rates change over time with changes in the demand and supplyfor loans. Use data given in the table to draw a line graph that shows the annual averagefor new-home mortgage interest rates from 2006 through 2011. How much did thisinterest rate fall from 2006-2011? How important is a change of 1 percent in themortgage interest rate to a person who wants to borrow $100,000 to buy a home?

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Term
Fall
Professor
CORRICK
Tags
Interest Rates, Debt, Interest, Mortgage loan

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