Home / Questions / If the demand for investment loans rises, this could be the result of a.the discovery of

If the demand for investment loans rises, this could be the result of a.the discovery of

If the demand for investment loans rises, this could be the result of

a.the discovery of new and better roundabout methods of production.

b.a lower rate of time preference in society.

c.a lower interest rate.

d.a higher interest rate.

e.a and c

 

 

 

142.A firm knows that it can borrow funds at 7 percent to invest in capital. Whether or not it borrows the funds depends upon the

a.amount of people's saving.

b.rate of time preference of consumers.

c.return on capital relative to the price of credit.

d.difference between its interest payments and the interest rate.

e.none of the above

 

 

 

143.The price of a loanable fund is greater than the return on capital. It follows that firms will

a.not borrow funds and eventually the capital stock will decrease and the return on capital will rise.

b.borrow funds and, as a result, the capital stock will rise.

c.not borrow funds and eventually the capital stock will increase and the return on capital will rise.

d.borrow funds and, as a result, the price of credit will rise.

e.none of the above

 

 

 

144.The return on capital is greater than the price of a loanable fund. It follows that firms will

a.borrow funds, the capital stock will rise, and eventually the return on capital will fall.

b.borrow funds, the capital stock will fall, and eventually the return on capital will rise.

c.not borrow funds and, as a result, the price of credit will rise.

d.not borrow funds and eventually the capital stock will decrease and the return on capital will fall.

e.none of the above

 

 

 

145.Which of the following statements is false?

a.Capital depreciates over time.

b.As the capital stock decreases, the marginal physical product of capital rises.

c.If the return on capital is less than the price of credit, a firm will not borrow funds to invest in capital.

d.If the return on capital is greater than the price of credit, then the price of credit must be greater than the price for loanable funds.

 

 

 

146.The nominal interest rate is

a.determined by the forces of supply and demand in the consumer goods market.

b.the interest rate in current dollars, unadjusted for inflation.

c.higher than the real interest rate even if the expected inflation rate is zero.

d.lower than the real interest rate even if the expected inflation rate is zero.

e.b and d

 

 

 

147.The current nominal interest rate is 9 percent. If the expected inflation rate changes from 2 to 3 percent (ceteris paribus), it follows that the demand for loanable funds will

a.rise by more than the supply of loanable funds will rise.

b.will rise by less than the supply of loanable funds will fall.

c.will fall by more than the supply of loanable funds will rise.

d.rise by the same amount that the supply of loanable funds will rise.

e.none of the above

 

 

 

148.The current real interest rate is 6 percent. It follows the nominal interest rate is __________ percent if the expected inflation rate is __________ percent.

a.8; 14

b.10; 2

c.-2; 4

d.9; 3

e.There is not enough information to answer the question.

 

 

 

149.When the expected inflation rate is zero, then it follows that the

a.real interest rate is greater than the nominal interest rate.

b.demand for loanable funds is equal to the supply of loanable funds.

c.demand for loanable funds is greater than the supply of loanable funds.

d.real interest rate is less than the nominal interest rate.

e.none of the above

 

 

 

150.Which of the following is true?

a.The real interest rate matters more to borrowers than the nominal interest rate.

b.The nominal interest rate is equal to the real interest rate minus the expected inflation rate.

c.If there is expected deflation (expected decline in the price level), instead of expected inflation, the nominal interest rate will be greater than the real interest rate.

d.The nominal interest rate is determined by the demand for credit and the supply of credit, or by the demand for loanable funds and the supply of loanable funds.

e.If there is expected deflation, the nominal interest rate will necessarily be negative.

Dec 09 2019 Read more Less More

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