Figure 26-4

question 192

Multiple Choice

Figure 26-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars.
-Refer to Figure 26-4.If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent,then the equilibrium real interest rate is

• A)lower than 6 percent.
• B)6 percent.
• C)between 6 percent and 8 percent.
• D)higher than 8 percent.

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Definitions:

Face Value

The nominal value of a security stated by the issuer, usually representing the amount to be repaid at maturity for bonds.

Times Interest Earned Ratio

A metric used to measure a company's ability to meet its debt obligations by comparing its interest expenses to its earnings before interest and taxes.

Debt

An amount of money borrowed by one party from another, under the condition that it is to be paid back at a later date, often with interest.

Investment

The action or process of investing money for profit or material result.