For an Imaginary Economy,when the Real Interest Rate Is 5

question 8

Multiple Choice

For an imaginary economy,when the real interest rate is 5 percent,the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000.Currently,the nominal interest rate is 9 percent and the inflation rate is 2 percent.Currently,

• A)the market for loanable funds is in equilibrium.
• B)the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will rise.
• C)the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will fall.
• D)the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,and as a result the real interest rate will rise.

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Definitions:

ESOPs

Employee Stock Ownership Plans, a program that provides a company's workforce with an ownership interest in the company.

Share Price

The current price at which a single share of a company's stock can be bought or sold.

Pensions

Retirement plans that provide a fixed income to individuals who are no longer working due to age or disability.

Stock Options

Financial incentives given to employees, granting them the right to buy company shares at a set price after a certain period.