The Real Interest Rate Is ________ Related to the Supply

question 167

Multiple Choice

The real interest rate is ________ related to the supply of loanable funds because ________.

• A) positively; the opportunity cost of consumption expenditure increases as the real interest rate rises.
• B) negatively; the opportunity cost of consumption expenditure increases as the real interest rate rises.
• C) positively; people are motivated to increase their consumption expenditure as the real interest rate rises.
• D) negatively; people are motivated to save more as the real interest rate rises.
• E) None of the above answers are correct.

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Definitions:

Estimated Life

The expected duration over which an asset is likely to be useful or productive in its intended operation, used for depreciation purposes.

Straight-Line Depreciation

A method of allocating an asset's cost evenly across its useful life, resulting in the same depreciation expense each year.

Depreciable Cost

The total cost of a tangible asset that can be depreciated over its useful life, excluding salvage value.

Depreciation Expense

Dividing the expense of a material asset throughout its service life.