4.7 Loanable Funds Market MCQ
If investors feel that business conditions will deteriorate in the future, the demand for loans and real interest rate in the loanable funds market will change in which of the following ways in the short run?
Demand for Loans- Decrease Real Interest Rate- Decrease
If the federal government reduces its budget deficit when the economy is close to full employment, which of the following will most likely result?
Interest rates will decrease.
All of the following changes will shift the investment demand curve to the right EXCEPT
an increase in the real interest rate
An increase in government spending with no change in taxes leads to a
higher interest rate
Which of the following changes in the loanable funds market will decrease the equilibrium real interest rate?
An increase in foreign financial capital inflows
Which of the following changes would most likely cause an increase in interest rates in the short run?
An increase in government spending financed by borrowing
Which of the following will lower the prices of a country's outstanding government bonds?
An outflow of financial capital to other countries
If the loanable funds market is in equilibrium, then which of the following must be true?
Borrowing equals lending.
Which of the following is most likely to increase the real interest rate in Country Z ?
Country Z is viewed as having increased political and economic risk.
Assume that the government finances its spending by borrowing from the public. If the government increases deficit spending, the price of previously issued bonds and the real interest rate will change in which of the following ways?
Price of Bonds- Decrease Real Interest Rate- Increase
Which of the following will most likely result in a lower real interest rate in a nation?
The citizens of the nation increase their savings for retirement.
In the short run, government deficit spending will most likely
raise nominal interest rates
The loanable funds market is best described as bringing together
savers and borrowers
