Any Change That Reduces Desired Saving Relative to Desired Investment

question 47

Multiple Choice

Any change that reduces desired saving relative to desired investment (for a given level of output) causes the real interest rate to ________ and shifts the IS curve ________.

• A)increase;down
• B)increase;up
• C)decrease;down
• D)decrease;up

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Definitions:

Credit Crisis

A financial situation characterized by a severe shortage of credit or loans, often resulting in widespread financial and economic instability.

Special Purpose Vehicles

Entities created for a specific financial transaction or to isolate financial risk, used in securitizations and project finance.

Asset Securitization

The process of pooling and repackaging of homogenous illiquid financial assets into securities that can be sold to investors.

Credit Enhancements

Strategies or financial products used to improve the credit worthiness of a financial transaction, reducing the risk for investors.