If We Were to Change the Interpretation of the Term

question 19

Multiple Choice

If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds, rather than the supply of loanable funds, then

• A)crowding out would not be a consequence of an increase in the budget deficit.
• B)higher interest rates would not be a consequence of an increase in the budget deficit.
• C)an increase in the budget deficit would cause the demand for loanable funds to decrease.
• D)we would be making only a semantic change in how we analyze the effects of government budget deficits.

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Definitions:

Condensation Polymer

A polymer formed by the reaction where two molecules combine with the simultaneous elimination of a small molecule, such as water.

Hydrolyzed

The chemical process in which a molecule is split into two parts through the addition of water, breaking chemical bonds in the molecule.

Acidic Conditions

An environment or a set of circumstances where the pH is less than 7, promoting reactions typical of acids.

Synthetic Rubber

A type of rubber produced through the polymerization of monomers, designed to replicate or enhance the properties of natural rubber.