econ 300 ch 15-17??

Foreign entities a. are generally borrowers of domestic (U.S.) loanable funds. b. are generally lenders in the domestic (U.S.) loanable funds. c. typically require a greater inflation premium than domestic borrowers. d. typically require a smaller inflation premium than domestic borrowers. e. are not concerned about the U.S. interest rate compared to their own, since it is illegal for them to lend in the United States.

b. are generally lenders in the domestic (U.S.) loanable funds.

What occurs in the loanable funds market? a. Borrowers are almost always taken advantage of b. The government gets loans but not consumers c. the government lends money to big corporations d. savers (typically households and individuals) supply funds to borrowers (typically firms) e. savers (typically firms) supply funds to borrowers (typically the government)

d. savers (typically households and individuals) supply funds to borrowers (typically firms).

Bank's Balance Sheet

loans are assets and deposits are liabilities; assets such as loans, are equal to the liabilities which are deposits held for investors.

assume you put your money into an asset that pays you 10% interest and assume that inflation is 4%. which statement is correct? A. The real rate of interest is 6% B. If the rate of inflation falls, your real rate of interest from this asset would also fall C. The nominal rate of interest is 10% and the real rate is 4% D. the textbook states that all interest rates would be assumed to be real rates thus the nominal rate is 14% E. Nominal rate of interest is 40%

A. A. The real rate of interest is 6% R=i-pi R = (10-4)% R=6%

assuming the supply of loanable funds is at S1, which of the following represents an increase in time preferences of people in a nation? A. movement Down and to the left along S1 B. movement up and to the right along S1 C. A shift to $3 D. no change E. a shift to $2

C. A shift to $3 people want to buy NOW so investment decreases

Borrowers in the loanable funds market primarily consist of A. Credit card companies, banks, and firms B. Household, foreign governments, and bonds. C. Government and firms. D. Household and foreign entities. e. mutual fund firms, Stock exchanges, and loan sharks.

C. Government and firms.

In the graph, line 1 represents ___, line 2 represents ___, and 5% represents A. Investments, the demand for loanable funds, the equilibrium interest rate B. savings, the loanable funds supply, a surplus of loanable funds C. Savings, the demand for loanable funds, the equilibrium interest rate D. investment, the supply of loanable funds, a shortage of loanable funds E. foreign savings, the supply of loanable funds, a surplus of loanable funds

C. Savings, the demand for loanable funds, the equilibrium interest rate

for a bond, the date on which the loan must be repaid is called the A. amortization B. settlement C. maturity D. expiration E. deadline

C. maturity

The concept of the loanable funds market is: A. the market by which borrowers (suppliers) and lenders (demanders) Exchange funds for early availability at a price, which is represented by the interest rate. B. that the interest rate is determined by multiplying the risk premium by the coefficient of pure interest C. The market by which lenders (savers) and borrowers exchange funds for earlier availability at a price which is represented by the interest rate D. similar to the notion of consumer and producer surplus, where the interest rate represents either consumer surplus, depending on which who is doing the borrowing E. similar to that of a grocery store Dash goods are sold and money is borrow to pay for them.

C. the market by which lenders (savers) and borrowers exchange funds for earlier availability at a premium, which is represented by the interest rate.

one could correctly argue that lower capital productivity would; A. only affect interest rates in the long run B. reduce the value of capital and the supply of loanable funds C. Increase the capital and the demand for loanable funds D. reduce the value of capital and the demand for loanable funds E. Increase the value of capital and the supply of loanable funds

D. reduce the value of capital and the demand for loanable funds

when making decisions about saving and borrowing, people care most about A. nominal rate of interest B. the rate of saving minus the rate of borrowing C. inflation D. the real rate of interest E. the risk premium portion of the rate of interest

D. the real rate of interest

In graphic, of the market for a little bit of funds, how is a shortage of funds shown A. the distance between points C and the equilibrium B. how's the distance between points A and B C. As the distance between point D and the equilibrium D. is not shown E. the distance between points C and D

E. the distance between points C and D

explain the difference between stocks and bonds

Stock - part owner of a company Bonds- owns that are to be paid back with interest

Foreign savings enter the US loanable funds market, which curve is affected -supply or demand? How is the curve affected?

Supply of loanable funds increase our savings increase the curve shifts to the right

What is the difference between real interest rate and nominal interest rate

The difference between real and nominal interest rate can be displayed via Fisher's equation, i = r + pi The real interest rate, r, is corrected for inflation, pi, whereas nominal interest rate, i, isn't accounting inflation into it's interest rate.

1. What factor shift the demand of loanable funds

1. The factors that would shift the demand for Loanable Funds are caused by non-price factors, such as the changes in productivity of capital, changes in investors' confidence, and government borrowing.

In the craft, at an interest rate of 4%, A. The quantity demanded of loanable funds is greater than the quantity supplied of Little finds and there is a shortage of loanable funds B. quantity demanded of loanable funds is less than the quantity supplied of loanable funds and there is a shortage of loanable funds C. Demand for loanable funds is greater than the supply of loanable funds and there is a shortage of loanable funds D. quantity demanded of loanable funds equals the quantity supplied of loanable funds and equilibrium is reached E. the quantity demanded of loanable funds is greater than the quantity supplied of loanable funds and there is a surplus of loanable funds

A. The quantity demanded of loanable funds is greater than the quantity supplied of Little finds and there is a shortage of loanable funds (Qs < Qd)

1 advantage of bonds over stocks is that A. bonds are safer B. bonds are more liquid C. Bonds come with shareholder voting rights D. the money bonds earn is tax-exempt E. Bonds pay higher returns

A. bonds are safer govt bodns are safe with your money, Plus you get interest, whereas stocks are volatile and not a gaurnetee you'll get your money back

The graph represents the market for loanable funds, point C represents $40 million and point B represents $70 million, then it would be true that: A. interest rate A, there is a shortage of $30 million of loanable funds B. interest rate A, there is a surplus of $30 million of loanable funds C. Because there is a disequilibrium at interest rate A, interest rates must fall D. interest rate represented by A must be greater than that represented by B e. Interest rate A, the market is in equilibrium

A. interest rate A, there is a shortage of $30 million of loanable funds

Savings represents A. the supply of loanable funds B. minimum interest rate people are willing to accept (the reservation interest rate) C. Willingness of firms to borrow D. demand for loanable funds E. only funds supplied by foreigners, and because Americans don't save

A. supply of loanable funds

What is the role of the government in the loanable funds market? A. the government loans more than it borrows B. Government borrows more than it loans C. Government earns more interest on treasury security one interest rate rise D. Government sets the most interest rate E. the government is represented by the supply curve

B. Government borrows more than it loans

Assume the market for loanable funds is in the equilibrium at 5% interest, and assuming that firms become more pessimistic about future profits, all else being equal: A. Eq. interest rate would rise and equilibrium quantity would fall B. both eq. interest rate and the eq. quantity would fall C. The equilibrium interest rate would fall and the equilibrium quantity would rise D. both the equilibrium interest rate and the equilibrium quantity would rise E. equilibrium real rate of interest would become negative and the equilibrium quantity would remain unchanged

B. both eq. interest rate and the eq. quantity would fall

What is production timeline? a. Investment occurs, dollars are borrowed, and output produced. B. dollars are borrowed, Investment occurs, and output produced. C. savings occur, output is produced, and dollars are borrowed D.output produced., dollars are borrowed, and investment occurs E. borrowing occurs, output is produced, and investment occurs

B. dollars are borrowed, Investment occurs, and output produced.

To be used as money, it must have several characteristics. What are they? use examples to explain.

Money must be considered portable, durable, recognizable and easily divisible. In other 3rd world countries, it's evident that money has been tampered with so enough to not be able to fit this criterion, whereas in the United States at least, we are able to meet said conditions.

Power in a fractional reserve banking system such as the one using United States federal deposit insurance through the FDIC creates moral hazard

With the Federal Deposit Insurance Corporation (FDIC), investors are guaranteed their money back from possible bank bankruptcy. Before FDIC, there were innumerable cases of bank corruption and leaving investors empty-handed. The moral hazard is the lack of incentive for banks to guard against risks since they're protected from the consequences. So they defy their own morals for higher rewards regardless of the financial consequences. To this day, our current banking system is a fractional reserve system, where banks have the ability to loan out deposits at a fraction of what they are able to take in. This means they can create money when they loan out parts of the deposit as they function as financial intermediaries.

What factors shift the supply of loanable funds?

income and wealth, time preferences, consumption smoothing