Figure 8-4

question 300

Multiple Choice

Figure 8-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars.

-Refer to Figure 8-4. If the equilibrium quantity of loanable funds is $50 billion and if the equilibrium nominal interest rate is 8 percent, then

• A) there is an excess supply of loanable funds at a real interest rate of 6 percent.
• B) there is an excess demand for loanable funds at a real interest rate of 8 percent.
• C) the rate of inflation is approximately 2 percent.
• D) the rate of inflation is approximately 14 percent.

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Definitions:

MSE

Mean Squared Error, a measure of the average of the squares of the errors—that is, the difference between the estimator and what is estimated.

F-test Statistic

A statistical test used to compare the variances of two populations to investigate whether they are equal.

Regression Equation

An equation derived from regression analysis that expresses the predicted value of the dependent variable as a function of one or more independent variables.

Independent Variable

The variable in an experiment that is manipulated or changed by the researcher to observe its effect on the dependent variable.