A Fall in the Real Interest Rate

question 177

Multiple Choice

A fall in the real interest rate

• A)increases the quantity of loanable funds demanded because firms will want to borrow more
• B)decreases the quantity of loanable funds demanded because firms will want to borrow less.
• C)increases the quantity of loanable funds supplied because firms will want to borrow more.
• D)decreases the quantity of loanable funds supplied because firms will want to borrow less.

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Definitions:

Internal vs. External

A distinction often made in business and economics to compare processes, assets, or influences originating within an organization versus those coming from outside.

Equity Financing

The process of raising capital through the sale of shares in a company, thereby granting ownership to investors.

Dividend Decision

The process by which a company's board of directors decides the amount of profits to be distributed to shareholders and the amount to be retained.

Signaling Effect

The signaling effect is a theory in finance suggesting that the actions of a company, such as dividend announcements or share buybacks, send signals to the market about its future prospects.