A Change in the Tax Laws That Increases the Supply

question 139

Multiple Choice

A change in the tax laws that increases the supply of loanable funds will have a smaller effect on investment when

• A)the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic.
• B)the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic.
• C)both the demand for and supply of loanable funds are more elastic.
• D)both the demand for and supply of loanable funds are more inelastic.

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Definitions:

Disbursements

Payments made by a business, often related to operational expenses or loan repayments.

Optimal Average Cash Balance

The ideal level of cash a company seeks to maintain to minimize the costs associated with holding too much or too little cash.

Weekly Interest Rate

Interest calculated and applied on a weekly basis, often referred to in terms of loans or savings.

BAT Model

Behaviorally Adjusted Time (BAT) Model refers to a calculation method designed to account for the inefficiencies human behavior introduces into the financial markets.