The Real Interest Rate Is_{--------------------}related to the Supply of Loanable

question 11

Multiple Choice

The real interest rate is_{--------------------}related to the supply of loanable funds because_{--------------------}

• A)negatively; the opportunity cost of consumption expenditure increases as the real interest rate rises
• B)positively; people are motivated to increase their consumption expenditure as the real interest rate rises
• C)negatively; people are motivated to save more as the real interest rate rises
• D)positively; the opportunity cost of consumption expenditure increases as the real interest rate rises
• E)None of the above answers are correct.

---

Definitions:

Coupon Rate

The yearly interest rate a bond yields, represented as a percentage of its par value.

Semiannually

Occurring twice a year; a term often used in finance to indicate payments or calculations made every six months.

Market Rate

The prevailing interest rate available in the market for loans or deposits, subject to fluctuation based on demand, supply, and governmental policy.

Callable Bond

A callable bond is a type of bond that gives the issuer the right to repay the bond before its maturity date.