Which of the Following Is Least Likely to Affect Household

question 19

Multiple Choice

Which of the following is least likely to affect household demand for loanable funds?

• A)a decrease in tax rates
• B)an increase in interest rates
• C)a reduction in available projects with an expected high rate of return
• D)All of these are equally likely to affect household demand for loanable funds.

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Definitions:

Zero-Coupon Bonds

Debt securities that are sold at a deep discount and do not pay periodic interest payments, but instead are redeemed at their face value at maturity.

Yields to Maturity

The total return anticipated on a bond if it is held until it matures, considering all interest payments and the principal repayment.

Yield to Maturity

The total return anticipated on a bond if the bond is held until it matures, considering both the interest payments received and any gain or loss if the bond is purchased at a discount or premium.

Coupon

A detachable portion of a bond that is given up in return for the periodic interest payments.