What if the usury limit is raised to 7 percent per year

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Suppose that the demand for loanable funds for car loans in the Milwaukee area is $10 million per month at an interest rate of 9 percent per year, $12 million at an interest rate of 8 percent per year, and so on. If the supply of loanable funds is fixed at $15 million, what will be the equilibrium interest rate? If the government imposes a usury law and says that car loans cannot exceed 3 percent per year, how big will the monthly shortage (or excess demand) for car loans be? What if the usury limit is raised to 7 percent per year?

Reference no: EM13192411

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