If Households Experienced Greater Uncertainty About Their Economic Future,which of the Following

question 155

Multiple Choice

If households experienced greater uncertainty about their economic future,which of the following would occur in the market for loanable funds?

• A) Both the supply and demand for funds would increase,lowering the interest rate and raising investment spending.
• B) The supply of funds would decrease,raising the interest rate and lowering investment spending.
• C) The supply of funds would decrease,lowering both the interest rate and investment spending.
• D) The supply of funds would increase,lowering both the interest rate and investment spending.
• E) The supply of funds would increase,lowering the interest rate and raising investment spending.

---

Definitions:

Discount Rate

A rate used to determine the present value of future cash flows; in monetary policy, it refers to the interest rate charged to commercial banks for loans from a central bank.

Trust Agreement

A legal document establishing a trust and outlining the rules and guidelines that the trustees must follow in managing the trust assets for the benefit of the beneficiaries.

Present Value

The worth in present terms of a sum of money due in the future or sequences of cash receipts, using a given rate of return for discounting.

Discount Rate

The rate of interest applied to calculate the current value of future cash flows.