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THE DEMAND FOR LOANABLE FUNDS Econ 2105-C ,10/20/09

THE DEMAND FOR LOANABLE FUNDS Econ 2105-C ,10/20/09. The New York Times. Eastman Machine Family owned tool company Buffalo, New York Have been making cutting tools for the textile industry for 120 years. Robert Stevenson President and CEO of Eastman Machine

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THE DEMAND FOR LOANABLE FUNDS Econ 2105-C ,10/20/09

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  1. THE DEMAND FOR LOANABLE FUNDS Econ 2105-C ,10/20/09

  2. The New York Times Eastman Machine • Family owned tool company • Buffalo, New York • Have been making cutting tools for the textile industry for 120 years

  3. Robert Stevenson • President and CEO of Eastman Machine • Last year had to lay off a dozen workers due to financial decline • However, the dollar’s near 20% decline since March has made Eastman Machine’s goods more competitive

  4. Increase in Expected Profit!!! Mr. Stevenson and Eastman Machine are expecting a substantial increase in profit!!

  5. INCREASE IN EXPECTED PROFIT • “Other things remaining the same, the greater the expected profit from new capital, the greater is the amount of investment and the greater is the demand for loanable funds.” -- Textbook • Hence, Demand for Loanable Funds Curve shifts rightward

  6. Real Interest Rate (% per year) SLF DLF0 Loanable Funds (trillions of 2000 dollars)

  7. Real Interest Rate (% per year) SLF DLF1 DLF0 Loanable Funds (trillions of 2000 dollars)

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