What determines the supply of loanable funds and the demand for loanable funds?
What will be an ideal response?
The supply of loanable funds is determined by the willingness of households to save, by the extent of government saving, and by the extent of foreign saving that is invested in U.S. financial markets. The demand for loanable funds is determined by the willingness of firms to borrow money to engage in new investment projects.
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If the Fed wants to close a recessionary gap, should it buy or sell government securities? Why?
What will be an ideal response?
If no beautification projects were undertaken in a city except by private individuals or firms, the city would almost surely be less beautiful than otherwise comparable cities because
A) aesthetic standards vary so widely. B) it is extremely difficult to induce people to pay on a voluntary basis for the pleasure they receive from urban beautification projects. C) people may enjoy beauty, but they are not willing to pay for it. D) private individuals and firms generate more external costs than benefits.
If people refused to use banks to create checkable deposits, the banking system would:
a. not be affected in the money creating process. b. not have a way to loan out excess reserves. c. be able to expand the money supply by more than the money multiplier indicates. d. not be able to create new money. e. not be able to find new borrowers.
If the United States imposes an import quota on clothing, U.S. imports
a. increase, exports increase, and U.S. net exports are unchanged. b. increase, exports decrease, and U.S. net exports increase. c. decrease, exports increase, and U.S. net exports decrease. d. decrease, exports decrease, and U.S. net exports are unchanged.