Suppose business decision makers become more optimistic about future economic conditions and desire additional funds to expand their plant capacity. What is the likely effect on the loanable funds market?
a. The demand for loanable funds will increase, and the interest rate will rise.
b. The demand for loanable funds will decrease, and the interest rate will fall.
c. The supply for loanable funds will increase, and the interest rate will fall.
d. The supply for loanable funds will decrease, and the interest rate will rise.
A
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One reason for the controversy surrounding the decision by the European Central Bank to buy Greek bonds was that:
A) it may increase moral hazard by encouraging other European governments to issue more debt than private investors were willing to buy B) it may increase adverse selection by encouraging other European governments to issue more debt than private investors were willing to buy C) it may result in higher risk premiums as private investors anticipate a default by Greece D) it may worsen the Greek recession by increasing Greek interest rates
The price elasticity of gasoline supply in the U.S. is 0.4. If the price of gasoline rises by 8%, what is the expected change in the quantity of gasoline supplied in the U.S.?
A) +3.2% B) -3.2% C) +32.0% D) +0.32%
When income falls
A) the demand for a normal goods rises. B) the demand for an inferior goods rises. C) there is a movement downward along the demand curve for a normal good. D) there is a movement downward along the demand curve for an inferior good.
In the long run, all firms in a perfectly competitive industry
A) earn economic profits. B) break even. C) suffer economic losses. D) sell differentiated products to earn economic profits.