If Suddenly a 4 Percent Inflation Rate (Instead of a Zero

question 55

Multiple Choice

If suddenly a 4 percent inflation rate (instead of a zero percent inflation rate) is expected by both suppliers and demanders in the loanable funds market, then

• A)the demand for loanable funds curve will shift rightward, and the supply of loanable funds curve will shift leftward.
• B)the demand for loanable funds curve will shift leftward, and the supply of loanable funds curve will shift rightward.
• C)both the demand for loanable funds curve and the supply of loanable funds curve will shift leftward.
• D)both the demand for loanable funds curve and the supply of loanable funds curve will shift rightward.

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Definitions:

Municipal Bond

A debt security issued by a city, municipality, or county to finance its capital expenditures, often offering tax-free interest payments to investors.

Municipal Bond

A debt security issued by a state, municipality, or county to finance its capital expenditures, often tax-exempt for investors.

Marginal Tax Bracket

The tax rate that applies to the next dollar of taxable income, indicating the percentage of tax paid on the last dollar earned.

Taxable Yield

The yield on an investment before the effects of taxes are taken into account, relevant for investors in taxable accounts.