Suppose the Real Interest Rate Increases from 4 Per Cent

question 55

Multiple Choice

Suppose the real interest rate increases from 4 per cent to 6 per cent. As a result,

• A) firms increase their demand for loanable funds.
• B) governments decrease their demand for loanable funds.
• C) firms decrease the quantity demanded of loanable funds.
• D) governments decrease the quantity supplied of loanable funds.
• E) governments increase the supply of loanable funds.

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Definitions:

Diminished

Reduced in size, importance, or intensity.

Adduction

Movement towards the midline of the body, as in bringing the fingers or toes together.

Abduction

The act of forcibly taking someone away against their will, often used in the contexts of kidnapping or moving a limb away from the body's central line.

Flexion

The movement that decreases the angle between two body parts, such as bending the elbow or knee.