Explain why the real interest rate is the opportunity cost of loanable funds
What will be an ideal response?
The real interest rate is the opportunity cost of loanable funds because the real interest rate measures what is forgone by using the funds. If the funds are loaned, then the real interest rate is received. If the funds are borrowed, then the real interest is paid for the funds. The real interest rate forgone when funds are used either to buy consumption goods and services or to invest in new capital goods is the opportunity cost of not saving or not lending those funds.
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According to Okun's Law, the year-to-year change in the rate of unemployment is ________ if the annual growth rate of real GDP is 5%
A) -5% B) 5% C) 2% D) -1%
A price floor set above a market equilibrium price causes
A) a surplus. B) a shortage. C) producers to receive lower prices. D) consumers to pay lower prices.
Economics is a social science rather than a "hard" science like physics because
a. economists abstract from reality when creating their theories. b. economics is easier to study than physics. c. economists must explain their theories to policy makers who lack formal mathematical training. d. economists study human behavior, which is affected by an unpredictable and vast range of influences.
As long as marginal product of labor exceeds the average product of labor, then average product of labor
A) must fall. B) must rise. C) will stay unchanged. D) will be at its maximum value.