If There Is Shortage of Loanable Funds, Which of the Following

question 142

Multiple Choice

If there is shortage of loanable funds, which of the following is most likely to happen?

• A)The supply for loanable funds shifts right and the demand shifts left.
• B)The supply for loanable funds shifts left and the demand shifts right.
• C)Neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium.
• D)Neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

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Definitions:

Intrinsic Value

The inherent worth of an asset, independent of its market price.

Actual Value

The true, inherent, or fair value of an asset, reflecting its genuine worth as opposed to market price or cost.

Time Value

The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Call Option

An agreement in finance that grants the purchaser the option, but not the requirement, to purchase a certain asset like a stock, bond, commodity, or similar at a predetermined price during a defined timeframe.