Suppose That the Price of Loanable Funds Is Greater Than

question 39

Multiple Choice

Suppose that the price of loanable funds is greater than the return on capital. It follows that firms will

• A)not borrow funds and eventually the capital stock will decrease and the return on capital will rise.
• B)borrow funds and, as a result, the capital stock will rise.
• C)not borrow funds and eventually the capital stock will increase and the return on capital will rise.
• D)borrow funds and, as a result, the price of credit will rise.

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