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.

Understand the impact of homothetic and Cobb-Douglas preferences on consumption allocations.

Recognize how different utility functions affect economic outcomes in a pure exchange economy.

Identify the conditions under which a Pareto optimal allocation is also a competitive equilibrium.

Understand the role of initial endowments in determining allocations in pure exchange economies.