If the Price for Loanable Funds Is Greater Than the Return

question 129

Multiple Choice

If the price for loanable funds is greater than the return on capital, then firms will

• A)borrow in the loanable funds market and invest in capital goods, and as this happens, the quantity of capital decreases and its return rises.
• B)borrow in the loanable funds market and invest in capital goods, and as this happens, the quantity of capital increases and its return falls.
• C)not borrow in the loanable funds market, and over time the capital stock will decrease and the return on capital will fall.
• D)not borrow in the loanable funds market, and over time the capital stock will decrease and the return on capital will rise.

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