Chapter 9 Learning Curve

This event would definitely cause the equilibrium quantity of savings to increase:

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

According to the life-cycle theory of savings, people tend to:

borrow when young

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

Supply in the market for loanable funds would increase, and the interest rate would fall

The decrease in private consumption and investment that occurs when government borrows more is called:

crowding out

Which condition could break the bridge between savers and borrowers?

insecure property rights

The shadow banking system includes:

investment banks

The shadow banking system includes:

investment banks, hedge funds, and money market funds, as well as a variety of other complex financial entities

Time preference reflects the fact that today feels more ________ than tomorrow.

real

Financial institutions such as banks, bond markets, and stock markets:

reduce the cost of moving from savers to borrowers

If profits are high,

shareholders benefit.

if profits are low or negative,

shareholders suffer losses

The market for loanable funds is the market where:

suppliers of funds trade with demanders of funds

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

higher, investment

AIDS has dramatically reduced life expectancies in Africa. What impact would this have on saving rates?

it would reduce the rate of saving, becaue many Americans expect to die young.

People whose income fluctuate (like salespeople, writers, and homebuilders)smooth consumption by:

saving

The income that is not spent on consumption goods is

savings

The four major factors that impact savings are:

-smoothing consumption - impatience - marketing and psychological factors - interest rates