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:

Consumer Price Index

A benchmark for assessing the weighted average expenses of various consumer items and services like food, healthcare, and transportation.

Substitution Bias

A bias in measuring the cost of living or inflation that arises from the substitution of relatively cheaper goods for more expensive ones by consumers.

Basket of Goods

A fixed set of products and services, used to monitor changes in price levels over time to measure inflation.

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.