Which of the following is the best measure of the standard of living of the typical person in a country?
real GDP per person
-increase over time as the labor force grows
-increases over time as technological change occurs
What is most likely to lead to sustained long-run growth?
increase in human capital
In determining whether to borrow funds, firms compare the rate of return they expect to make on an investment with
the interest rate they must pay to borrow the necessary funds
What factors determines the supply of loanable funds?
the willingness of households and governments to save
Holding all else constant, a federal government budget deficit will
decrease the supply of loanable funds and increase the equilibrium real interest rate
The shift in supply to the right represents a ____ in the supply of loanable funds
The shift in supply to the left represents a ___ in the supply of loanable funds
With the shift in supply to the right, the equilibrium quantity of loanable funds
With the shift in supply to the left, the equilibrium quantity of loanable funds
An increase in the real interest rate results in little increase in private savings by households
the supply line increases as real interest rates and loanable funds increase
A decrease in the real interest rate results in a substantial increase in spending on investment projects by businesses
the demand line decreases as real interest rates decrease and loanable funds increase
The federal government eliminates 401(k) retirement accounts
the supply for real interest rates and loanable funds shift to the left
The federal government reduces the tax on corporate profits
the demand for real interest rates and loanable funds shifts to the right
What is a lonable fund?
Households supply loanable funds because of the
interest income received from the borrowers
Businesses demand loanable funds because
firms need to borrow funds for new projects, such as building new factories, or carrying out new research projects
Crowding out occurs when
governments must borrow funds which causes interest rates to rise and thus private investment is reduced
An insurance company
a financial intermediary because they take premiums and use them to purchase financial securities
“Saving money is not lending. How can it be? When I save my money, I put it in a back. I don’t loan it out to someone else.”
Incorrect. The supply of loanable funds is determined by household savings.
What is a financial securities that represent promises to repay a fixed amount of funds?
What is not a service that the financial system provides for savers and borrowers?
Guaranteeing savers high rate of return
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