The Quantity of Loanable Funds Supplied Increases If the Real

question 79

Multiple Choice

The quantity of loanable funds supplied increases if the real interest rate rises, all other things remaining the same, because the

• A) real interest rate is the opportunity cost of saving.
• B) real interest rate is the opportunity cost of consumption.
• C) demand for investment increases when the real interest rate rises.
• D) cost of living is determined by the real interest rate.
• E) real interest rate is inversely related to the cost of buying on credit.

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Definitions:

Interest Expenses

The cost incurred by an entity for borrowed funds over a period, usually expressed in monetary terms.

Corporate Tax Rate

The percentage of a corporation's profits that is paid to the government as tax, varying by country and sometimes by the size or type of business.

Enterprise Multiple

A ratio used to determine the value of a company that takes into account its debt and equity, calculated by dividing the enterprise value by EBITDA.

EBIT

Known as Earnings Before Interest and Taxes, this financial gauge calculates a firm's profitability without considering interest and income tax charges.