Module 2:(M&E: Lecture NotesfPower Point Slides 3: Loonoble Funds Theory article) for M 8:13 Chapter 4): Loonoble Funds Theory 4. Review Chapter 4 81 Module 2: Loanable Funds Theory [see lecture notes). a. Explain the loanable funds theory in your own words [fine to show graphs if you'd like or discuss the theory in your own words. Include the parties that are the net suppliers and demanders of loanable funds and using net supply and demand curves for funds, how the real interest rate in and economy is determined). Also discuss factors that affect the supply of loanahle funds and factors that affect the demand for loans funds including their expected effect on respecvely the demand and supply of loanable funds. 33-. If the Federal Reserve decided to reduce the money supply by engaging in open market operaons by selling securities to the non-bank public, explain what 1will happen to the equilibrium interest rate in the US. [In your description describe or show with a graph the change in the supply curve for loanable funds and the change in its intersection with the demand curve for loanable funds). c. Using the loanable funds theory, explain what will happen to the real interest rate in an economy if a new renewable energy technology is developed that signicantly reduces energy use and carbon emissions and is also very cheap for consumers to be able to afford the new technology. [In your description describe or show with a graph the change in the supply curve for loanable funds and the change in its intersection with the demand curve for loanable funds). d. Using the loanable funds theory and the demand and supply of loanable funds, explain what will happen to the real interest rate in an economy the federal government has a large deficit that it needs to finance. (In your description describe or show with a graph the change in the supply curve for loanahle funds and the change in its intersection with the demand curve for 'I 11 I" 'I'I