Macro

If the demand for loanable funds increases, ceteris paribus, interest rates will:

Increase

When a family's income becomes more uncertain, we expect its saving to:

Increase

The __________ represent the price of a loan.

Interest rate

Bond prices and __________ move in opposite directions.

Interest rates

When Lehman Brothers went bankrupt, most of Lehman's managers:

Lost some money but still ended up being very rich.

As interest rate decreases, what happens to the quantity of loanable funds demanded?

Quantity demanded will increase

What effect will an increase in interest rates have on the quantity of loanable funds supplied?

Quantity supplied will increase

Calopolis, a college town in Northern California, has for many years banned the presence of fast food restaurants in city limits. As of 2012, however, the city will allow several fast-food companies to open franchised locations:

Shift in demand

Due to an increase in revenues after a tax hike, the United States is able to eliminate the deficit and begins to maintain a balance budget for the first time in several decades:

Shift in demand

As a result of a stock market boom, individuals begin to feel richer and spend more while also saving less.

Shift in supply

China decides to reduce its capital investment in the United States, as it expects low returns due to a weak U.S. economy:

Shift in supply

If the projected rate of return for a project is less than the interest rate for a loan that is necessary to complete the project, how will the borrowing business act?

The business will not take out the loan

Which of the following best defines a financial intermediary?

A financial institution that transforms investor funds into financial assets

Something of value that by agreement becomes the property of the lender if the borrower defaults is called:

Collateral

If the government decides to drastically increase spending (and by extension the budget deficit) during an economic recession, it will increase the __________ loanable funds and ____________ equilibrium interest rates.

Demand for; increase

When business firms become more pessimistic about the state of the economy the:

Demand to borrow shifts to the left

Islamic banking system is based on the principle of partnership. In Islamic banking, the shareholders, the depositors and the borrowers-all would participate on profit-loss sharing basis. Whereas the relation of customer and conventional bank is of: a. creditor and debtor b. principal and agent c. pledger and pledged d. client and advisor

a. creditor and debtor

Firms raise money by using which two methods? a. selling stocks and issuing Treasury bills b. selling stocks and issuing corporate bonds c. borrowing from banks and borrowing from the government d. borrowing from international countries and from the government

b. Selling stocks and issuing corporate bonds

Which of the terms acts as the "price" in the market for loanable funds? a. capital b. interest rate. c. demand d. supply

b. interest rate

If the supply of loanable funds increases and the demand for loanable funds decreases at the same time, interest rates will:

decrease

When the government increases borrowing by issuing bonds, bond prices then ______________ and interest rates_______________.

decrease; increase

The source of the _____ for loanable funds is investment

demand

The U.S. federal government finances most of its new spending by:

issuing bonds.

The source of the ______ for loanable funds is saving

supply

The shadow banking system refers to

the unregulated non-bank financial firms that engage in borrowing from investors and lending to households and firms.