If the Return on Capital Is 12 Percent and the Price

question 134

Multiple Choice

If the return on capital is 12 percent and the price for loanable funds is 9 percent, then

• A)firms will not be willing to borrow loanable funds until either the return on capital decreases or the price for loanable funds increases, because the market for loanable funds is not in equilibrium and businesses will be wary of further investment.
• B)firms will realize that if they borrow loanable funds and invest in capital goods, it will cause the return on capital to decrease, so they won't want to borrow the funds.
• C)savers will realize that they can earn more if they invest their savings in capital, so they will withdraw their savings and supply them to firms at 14 percent.
• D)none of the above

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Definitions:

Santiago Ramón Y Cajal

A Spanish neuroscientist recognized as one of the founders of modern neuroscience, renowned for his pioneering work on the structure of the nervous system.

Synapses

Junctions between two nerve cells, allowing them to communicate through electrical or chemical signals.

Donald Hebb

A Canadian psychologist who proposed that learning and memory are functions of the connections between neurons, summarized by the phrase "cells that fire together, wire together."

Hippocampus

A major component of the brain in humans and other vertebrates, associated with memory formation, navigation, and spatial awareness.