Predict the effect of each of the following events on the supply of and demand for loanable funds (increase, decrease, or no effect on supply; increase, decrease, or no effect on demand). What would be the likely effect on interest rates?
a. Television newscasters convince most people that the end of the world will occur in 2015.
b. Breakthrough advances in pharmaceuticals increase life expectancy to 100 years.
c. Geologists discover vast new oil deposits under the South Pole. (Hint: drilling in this harsh environment requires extremely large up-front capital expenses.)
d. A business downturn leads to corporate pessimism and increases workers’ fears of being laid off (assume workers try to increase their “emergency fund” savings when they’re worried about becoming unemployed).
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