If Financial Intermediaries Charge a Higher Rate of Interest to Lenders

question 35

Multiple Choice

If financial intermediaries charge a higher rate of interest to lenders than they pay to borrowers, then

• A)investing with borrowed funds involves a higher opportunity cost than investing with savings
• B)investing with saving involves a higher opportunity cost than investing with borrowed funds
• C)a firm is charged less interest to borrow than it can earn on savings
• D)the opportunity cost of investing with borrowed funds equals the opportunity cost of investing with savings
• E)a firm does not consider the market rate of interest when it makes investment decisions

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Definitions:

Piaget

A Swiss psychologist known for his pioneering work in child development, specifically for his theory of cognitive development that describes how children develop intellectual abilities.

Accommodation

A concept in psychology referring to the process of adjusting one’s schemas to incorporate new experiences.

Equilibration

The process in developmental psychology where individuals balance assimilation and accommodation to create stable understanding.

Postconventional

A stage in Kohlberg's theory of moral development where individuals base their moral judgments on principles that transcend societal and legal norms, focusing on universal ethical principles.