What are the factors that change the supply of saving and shift the supply of loanable funds curve?
What will be an ideal response?
There are three main factors that influence saving: disposable income, wealth, expected future disposable income, and default risk. The higher disposable income, the more people save, so an increase in disposable income shifts the supply of loanable funds curve rightward. The higher people's wealth, the less they save because they feel richer and do not see the need to save. Thus an increase wealth shifts the supply of loanable funds curve leftward. The higher the expected future disposable income, the less people save today. Thus an increase in the expected future disposable income shifts the supply of loanable funds curve leftward. Finally the higher the default risk, the less people save and so the supply of loanable funds curve shifts leftward.
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If we are going to get the most value from our resources, entrepreneurs should choose the investment alternatives that
A) reduce the value of resources and retard wealth accumulation. B) result in the production of the largest possible output regardless of value to consumers. C) are most heavily subsidized by the government. D) yield a profitable rate of return.
In a perfectly competitive market, firms in the long run earn zero economic profits. Why?
What will be an ideal response?
Examine the accuracy of the following statement: "Given that burgers and fries are complementary goods, if the price of fries increases the demand for both goods will fall."
What will be an ideal response?
The benefit of holding money is ________, while the opportunity cost of holding money is ________.
A. its usefulness in carrying out transactions; the nominal interest rate B. increased income; lost purchasing power C. the nominal interest rate; the fees charged by banks D. the nominal interest rate; its usefulness in carrying out transactions