Other Things Equal, an Increase in the Productivity of Capital

question 182

Multiple Choice

Other things equal, an increase in the productivity of capital goods will

• A) increase the demand for loanable funds and decrease the equilibrium interest rate.
• B) increase the demand for loanable funds and increase the equilibrium interest rate.
• C) increase the supply of loanable funds and decrease the equilibrium interest rate.
• D) increase the supply of loanable funds and increase the equilibrium interest rate.

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Definitions:

Treasury Stock

Shares that were once part of the outstanding shares and were bought back by the company.

Preferred Stock

A class of ownership in a corporation with a priority claim on assets and earnings before common stock.

Common Stock

A form of corporate equity ownership, a type of security representing an ownership stake in a corporation.

Market Price

The immediate rate at which assets or services are traded in the open market.