If the Real Interest Rate Is Below the Equilibrium Real

question 14

Multiple Choice

If the real interest rate is below the equilibrium real interest rate

• A) lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve will shift leftward.
• B) borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve will shift rightward.
• C) a shortage of loanable funds will cause the real interest rate to rise.
• D) borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve will shift leftward.

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Definitions:

Explicit Costs

Direct, out-of-pocket payments for wages, rent, materials, and other inputs in the production process.

Opportunity Costs

The value of the best alternative foregone when a decision is made to pursue a particular action, essentially the cost of choosing one option over another.

Implicit Costs

The opportunity costs of using resources owned by the firm for its own production, instead of earning income elsewhere.

Explicit Costs

Direct, out-of-pocket payments made for the operation of a business, such as wages, rent, and materials.