ECO 101 Chapter 29 Quiz Help

Bonds represent:

Corporate debt

What effect will an investment tax credit have on interest rates and the quantity of savings?

both interest rates and the quantity of savings will increase

if the interest rate increases then

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

what would represent loaning money to a firm

buying a bond

crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and causes: *savings to rise *consumption and investment to fall *savings to fall *consumption and investment to rise

consumption and investment to fall

Stock shares represent:

corporate ownership

When business firms become more pessimistic about the state of the economy, the interest rate --- and the quantity of borrowing and lending ---

decreases; decreases

at lower interest rates, the cost of investing --- and the quantity of funds demanded for investment ---

decreases; increases

A corporation is planning to finance the construction of new offices, but has limited funds. The corporation is likely to:

demand loanable funds by selling bonds

at which stage in life does someone generally dissave the most

during retirement

the loanable funds market is the market where

equilibrium interest rates are determined by the actions of borrowers and lenders

what institution channels loanable funds from savers to borrowers?

financial intermediaries

All else equal, time preference is the desire to

have goods and services sooner rather than later

people will usually save more if the interest rate is

higher

savings is

income that is not spent on consumption goods

savings is:

income that is not spent on consumption goods

An increase in life expectancy should cause saving in the US to:

increase

the buyer of a bond is a:

lender

Trading in the market for loanable funds determines the equilibrium: *amount of borrowing *level of savings *interest rate *level of savings, amount of borrowing, and interest rate

level of savings, amount of borrowing, and interest rate

financial intermediaries:

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

What is income that is not spent on consumption goods? *investments *savings *profits *asset retention

savings

firms primarily raise money by using which two methods

selling stocks and issuing corporate bonds

The supply of savings function shows the relationship between saving and: *consumption *the interest rate *income *age

the interest rate

investment is:

the purchase of new capital goods

an increase in the supply of savings will cause the interest rate

to decrease

Banks act as profit-seeking institutions, taking the supply of loanable funds from households and distributing them to borrowers. (T/F)

true

would an increase in government borrowing most likey cause an increase in the demand for loanable funds?

yes