One Could Correctly Argue That Higher Capital Productivity

question 76

Multiple Choice

One could correctly argue that higher capital productivity:

• A) would increase the value of capital and the supply of loanable funds.
• B) would reduce the value of capital and the supply of loanable funds.
• C) would only affect interest rates in the long run.
• D) would increase the value of capital and the demand for loanable funds.
• E) would reduce the value of capital and the demand for loanable funds.

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Definitions:

Loanable Funds

The money available for borrowing in the financial market, determined by the level of savings and the supply of credit.

National Saving

The total of private savings and government savings, essentially the portion of national income that is not consumed or spent by government.

Open-Economy Macroeconomic Model

A framework used to evaluate the interactions between a country’s macroeconomy and the global economy, taking into account trade, foreign investment, and exchange rates.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the real cost of funds to the borrower and the real yield to the lender.