Consider the Flow of Investment and Saving in a Small

question 34

Multiple Choice

Consider the flow of investment and saving in a small economy.Suppose the equilibrium interest rate is 2.5% and the equilibrium level of saving and investment is $4 billion.Now suppose,all else remaining equal,that there is an increase in per capita income.What will be the effect in the capital market?

• A)the interest rate will rise above 2.5% and the quantity of saving supplied will increase
• B)the interest rate will fall below 2.5% and the quantity of investment demanded will increase
• C)an indeterminate effect on the interest rate and an increase in the equilibrium level of investment and saving
• D)the interest rate will fall below 2.5% and the quantity of saving supplied will increase
• E)the interest rate will rise above 2.5% and the quantity of investment demanded will decrease

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Definitions:

Photocopy Clearly

The act of making a clear and readable copy of a document or image using a photocopying machine.

Secure Document Check Face

The process of examining the front side of a document to ensure its validity and security features are intact.

Cash Back

A feature of some financing arrangements and credit cards where a percentage of the amount spent is returned to the cardholder.

Conventional Photocopiers

Machines used for making copies of physical documents or images through a process involving light, electrical charges, and ink or toner.