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Question 1

The graph below shows the supply and demand curves in the market for credit card borrowing.

Graphing window shows horizontal axis: 0 to 13, vertical axis: 0 to 13. Start Graph, Color red

xy
06
17
28
39
410
511
612
713
814
915
1016
1117
1218
1319
Start Graph, Color blue
xy
012
111
210
39
48
57
66
75
84
93
102
111
120
13-1
Label "Quantity of Money" at pixel coordinates (175,0).Label "Interest rate" at pixel coordinates (0,170).Label "Demand" at (1,12+1). Label "Supply" at ((13-6)/ 1,11).

What is the equilibrium interest rate?

Hint

Question 2
Suppose that individuals shift their intertemporal consumption-savings decisions and decide to buy more things now. Which graph most accurately shows how this would affect demand and supply for borrowing money with credit cards? Note that the new curve is shown in gray.




 
Hint

Question 3
Suppose that consumers have a major change in their consumption/savings preferences. As a result of a serious recession they decide to consume less and save more. Which graph most accurately shows how this would affect demand and supply for borrowing money with credit cards? Note that the new curves are shown in gray.




 
Hint