econ 4

All else equal, if consumer preferences changed so that they generally decided to borrow less, what would occur?

Demand in the market for loanable funds would decrease, and the interest rate would fall.

true

Owner's equity is the value of the asset minus the debt associated with it.

Which of the following chains of logic explain the functions of banks in the process of economic growth?

Savers deposit their savings in banks. Banks direct these funds to firms that invest and engage in capital accumulation that furthers economic growth.

All else equal, if consumer preferences changed so that they generally decided to save less, what would occur?

Supply in the market for loanable funds would decrease, and the interest rate would rise.

If individuals become more impatient, what will happen in the market for loanable funds?

The supply of loanable funds will decrease, interest rates will rise, and the quantity of saving and borrowing will decrease.

Insecure property rights in bank account deposits typically lead to

a decrease in the supply of savings.

Which event would cause the equilibrium interest rate in the market for loanable funds to increase?

a leftward shift in the supply of loanable funds

Which event would definitely cause the equilibrium interest rate in the market for loanable funds to increase?

a simultaneous increase in the demand for loanable funds and a decrease in the supply of loanable funds

If the interest rate increases, then:

both the quantity saved and the quantity supplied of loanable funds will increase.

Suppose two assets are equally risky but have different prices. In this case, demand for the _____ asset would increase and its price would _____.

cheaper; rise

At lower interest rates, the cost of investing _____ and the quantity of funds demanded for investment _____.

decreases; increases

Which of the following is NOT a reason for the financial crisis of 2007-2008? increases in the leverage ratios for financial intermediaries excessive confidence about the stock market excessive securitization of liabilities collapse of the shadow banking system

excessive confidence about the stock market

Which factor is NOT one of the four major factors that economists believe determine the supply of savings? -impatience -financing large investments -smoothing consumption -marketing and psychological factors

financing large investments

Regulators and policymakers:

for a long time were unaware of the importance of the shadow banking system.

Bond prices and bond interest rates move:

in opposite directions.

Savings is:

income that is not spent on consumption goods

All else equal, higher _____ rates usually result in _____ savings.

interest; more

The higher the _____ rate, the _____ the quantity of funds demanded for investment.

interest; smaller

All else equal, _____ interest rates usually result in less _____.

lower; savings

Financial intermediaries:

reduce the costs of moving savings from savers to borrowers and investors.

The process in which bank loans are bundled together and sold on the market as financial assets is called:

securitization.

Which of the following represents ownership in a corporation?

stocks

All else equal, if consumers decide to save less, the:

supply of funds in the loanable funds market will decrease.

Which statement is TRUE? -the leverage ratio is the ratio of equity to debt. -The 2007-2008 crisis was brought about by high leverage and falling asset prices that created a panic in the shadow banking system and hence sharply reduced the amount of lending in the economy. -An insolvent firm has assets that exceed its liabilities. -owner's equity is the value of the debt minus the assets associated with it.

the 2007

Borrowing plays a valuable role in the economy, because:

the ability to borrow greatly increases the ability to invest.

The panic in the shadow banking system that led to the financial crisis of 2007-2008 was exacerbated by all of these conditions except:

the overregulation of the shadow banking system.

The _____ the interest rate, the greater the quantity of funds demanded for _____.

lower; investment

is it true that>

If profits are high, shareholders benefit, but if profits are low or negative, shareholders suffer losses.

whats true

When interest rates rise, bond prices fall.