Neco Model Questions Vol1 2021 Economics Question 5

Practice objective / multiple choice question 5 from the 2021 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2021 Economics Objective / Multiple Choice Medium Difficulty
Question 5 NECO_MODEL_QUESTIONS_VOL1 • 2021 • ECONOMICS • objective

In the loanable‑funds market, investment is given by \( I = 500 - 20r \) and private savings by \( S = 30r - 100 \), where \( r \) is the interest rate in percent and the quantities are in millions of naira. \( (i) \) Find the equilibrium interest rate and the equilibrium quantity of loanable funds before any government borrowing. \( (ii) \) The government decides to borrow ₦150 million, which reduces the amount of private savings available for lending by the same amount. Determine the new equilibrium interest rate and the new equilibrium quantity of loanable funds after this borrowing.

Answer Options

A. Before borrowing: r = 13 %, Q = 240 million; After borrowing: r = 16 %, Q = 180 million
B. Before borrowing: r = 11 %, Q = 280 million; After borrowing: r = 17 %, Q = 160 million
C. Before borrowing: r = 10 %, Q = 300 million; After borrowing: r = 14 %, Q = 210 million
Correct Answer D. Before borrowing: r = 12 %, Q = 260 million; After borrowing: r = 15 %, Q = 200 million
Correct Answer
D
Correct Option:
Before borrowing: r = 12 %, Q = 260 million; After borrowing: r = 15 %, Q = 200 million

About This Question

This is Neco Model Questions Vol1 2021 Economics Question 5. It is one of the objective questions from the 2021 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

View More Neco Model Questions Vol1 2021 Economics Questions More Neco Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support