Suppose That the Price of Loanable Funds Is Greater Than

question 90

Multiple Choice

Suppose that the price of loanable funds is greater than the return on capital. It follows that firms will

• A)not borrow funds and eventually the capital stock will decrease and the return on capital will rise.
• B)borrow funds and, as a result, the capital stock will rise.
• C)not borrow funds and eventually the capital stock will increase and the return on capital will rise.
• D)borrow funds and, as a result, the price of credit will rise.
• E)none of the above

---

Definitions:

Express Authority

Legal authority granted explicitly in a document or spoken agreement, allowing individuals or entities to perform certain acts.

Usual Business

Operations and activities that are considered normal and routine in the day-to-day operations of a company.

Capital Contributed

This refers to the amount of money or value of other assets that owners or shareholders have provided to a company for use in the business.

Partnership's Work

The projects, tasks, or business operations undertaken by a partnership as a collective.