Suppose That The Supply Of Loanable Funds Is Less Than The Demand For Loanable Funds At A Given Interest Rate What Woul 1 (261.23 KiB) Viewed 29 times
Suppose that the supply of loanable funds is less than the demand for loanable funds at a given interest rate. What would happen to the interest rate over time? It would increase until the demand and supply are equal. It might increase or decrease depending on government policies. It would remain at its given level because the equilibrium interest rate is not supposed to change. It would decrease until the demand and supply are equal.
If the demand for Canadian dollars increased in the foreign exchange market, what would be the effect on Canada's equilibrium real exchange rate? Canada's real exchange rate would remain the same. Canada's real exchange rate would increase (i.e. appreciate). Canada's real exchange rate would decrease (i.e. depreciate). Canada's real exchange rate might increase or decrease.
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