# L05 ConcepTest.docx - L5 Concept Test Lesson 5 ConcepTest...

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L5 Concept Test Lesson 5 ConcepTest 1.The loanable funds market is a simple market of supply and demand, which can be expressed as two functions: A Supply of Loanable Funds function and a Demand of Loanable Funds function. Use the following two functions to answer questions 1-a through 1-e: QL =4+r(1) QL =403r(2) a.Which function represents the Supply of Loanable Funds and why?
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b.Graph the two equations as the supply and demand curves on the axis provided below. Be sure to label your axis, your curves, and any X/Y-intercepts. c.What is the market equilibrium real interest rate and quantity of loanable funds? Show your work and label this point as point A. 4+r=40-3r, 4r=36, r=9/Q = 4 + 9 = 13
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d.Now assume a governmental agency decides to set the interest rate at 5. Would there be a shortage or a surplus of loanable funds?

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