As the Interest Rate (Price for Loanable Funds) Decreases, Businesses

question 74

Multiple Choice

As the interest rate (price for loanable funds) decreases, businesses will

• A)find it less profitable to invest in capital goods, because the lower interest rate means that they will earn a lower return on their investments.
• B)find it less profitable to invest in capital goods, because their costs of production will be higher.
• C)increase their borrowings of loanable funds, because the cost of borrowing has declined relative to the benefits of borrowing.
• D)decrease their borrowings of loanable funds, because there will now be cheaper ways to produce goods than to employ roundabout methods of production.
• E)b and c

---

Definitions:

Independent Events

Two events are independent if and only if the occurrence of one does not affect the probability of the other.

Disjunction

A logical operation yielding a true value if at least one of its operands is true; in grammar, it's the action of joining words or phrases in a way that indicates alternatives.

Occur

To happen or take place.

52-Card Deck

A standard deck of playing cards comprising four suits (hearts, diamonds, clubs, spades), each with 13 ranks (from two to ten, and the face cards jack, queen, king, and ace).