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

question 60

Multiple Choice

For an imaginary economy,when the real interest rate is 5 percent,the quantity of loanable funds demanded is $100,000 and the quantity of loanable funds supplied is $100,000.Currently,the nominal interest rate is 6 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.

---

Definitions:

Decision Maker's Profit

Reflects the gains realized by a decision maker after considering all costs and revenues associated with their decision.

Expected Monetary Value(EMV)

A financial concept used in decision-making to calculate the average outcome of future events, taking into account the probabilities and impacts of various possible outcomes.

State of Nature

A term referring to the possible outcomes or conditions in decision making that are not under the control of the decision-maker.

Federal Reserve Regulations

Rules set by the Federal Reserve to govern banks and other financial institutions, aiming to ensure the stability and integrity of the financial system.