The Demand Curve for Loanable Funds Slopes Down Because

question 74

Multiple Choice

The demand curve for loanable funds slopes down because

• A)at lower bond prices more loanable funds will be supplied.
• B)lower interest rates reduce the inflation rate.
• C)an increase in the interest rate makes borrowers more willing and able to demand more funds.
• D)a decrease in the interest rate makes borrowers more willing and able to demand more funds.

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Definitions:

Inflation Rate

The percentage increase in the price level of goods and services in an economy over a period of time, reflecting a reduction in purchasing power.

Consumer Price Index

An indicator quantifying the mean variation over periods in the financial commitments urban consumers make towards a particular set of consumer goods and services.

Basket of Goods

A fixed set of consumer products and services whose price is monitored over time to calculate inflation through the Consumer Price Index.

Inflation Rate

The rate at which prices for a wide range of goods and services go up, causing a decline in how much can be bought with the same amount of money.