An Increase in the Real Interest Rate the Quantity of Loanable

question 252

Multiple Choice

An increase in the real interest rate the quantity of loanable funds supplied and _ the quantity of loanable funds demanded.

• A) decreases; decreases
• B) increases; increases
• C) increases; decreases
• D) decreases; increases

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Definitions:

Market Yield

The rate of return anticipated on a bond if it is held until the maturity date, factoring in its current price, interest payments, and term length.

Treasury Bills

Short-term government securities issued at a discount from face value and mature at par.

Market Risk Premium

The extra return expected by investors for holding a risky market portfolio instead of risk-free assets.

Retained Earnings

Profits that a company chooses to keep for reinvestment in its operations rather than distributing to shareholders as dividends.