If Foreign Entities Save More and Businesses Become More Optimistic

question 126

Multiple Choice

If foreign entities save more and businesses become more optimistic about the future,we would correctly say that

• A) the new equilibrium quantity of loanable funds would decrease,but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.
• B) the new equilibrium quantity of loanable funds would increase,but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.
• C) the new equilibrium quantity of loanable funds would be indeterminate,but we would be certain the new equilibrium interest rate would be higher than the original.
• D) the new equilibrium quantity of loanable funds would be indeterminate,but we would be certain the new equilibrium interest rate would be less than the original.
• E) based on this information and because both changes would affect the demand for loanable funds in the opposite way,we would be unable to say anything about the relationship of the new equilibrium interest rate and quantity to the original interest rate and quantity.

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Definitions:

Rationalize

The process of modifying an expression to eliminate radicals from the denominator or complex numbers from the denominator of a fraction.

Denominator

The bottom part of a fraction that tells into how many equal parts the whole is divided.

Simplify

To simplify a mathematical expression to its most basic form.

Expression

A mathematical phrase that can include numbers, variables, and operation symbols but does not have an equality sign.