Use the Following to Answer Questions

question 251

Multiple Choice

Use the following to answer questions:
-(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $75 billion?

• A) Capital inflows from foreign citizens decline.
• B) The federal government runs a budget deficit, rather than a surplus.
• C) Profit expectations for business investments become less optimistic.
• D) The government eliminates taxes on income from interest earned.

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Definitions:

Foreign Currency Approach

A method of assessing and managing the risks associated with changes in foreign exchange rates.

Capital Budgeting

The process used by organizations to evaluate and select major investment projects based on their potential to generate additional profits.

Dividends

Return on capital of corporation paid by company to shareholders in either cash or stock; payments made out of a firm’s earnings to its owners, either in cash or stock.

Foreign Subsidiary

A foreign subsidiary is a company owned or controlled by another company, referred to as the parent company, which is located in a country different from the subsidiary.