Use the data below to answer the following questions:
|
Interest Rate
|
Supply of Loanable Funds(Millions $)
|
Investment Demanded (Millions $)
|
|
1%
|
$3
|
$12
|
|
2%
|
$5
|
$9
|
|
3%
|
$7
|
$7
|
|
4%
|
$8
|
$6
|
|
5%
|
$9
|
$4
|
a. If the interest rate is 2%, how much will households wish to save?
b. If the interest rate is 2%, how much will firms wish to invest?
c. Will banks wish to raise or lower interest rates?
d. What will the equilibrium interest rate and quantity of loans be?