ssess the following statements: 1. At any moment in time, households (in aggregate) demand a greater quantity of loanable funds at lower rates of interest; in other words, they are willing to borrow more money at lower interest rates. II. Business investment in new projects should be greater when interest rates are low, as the cost of financing potential projects should be low. Consequently, businesses will demand a greater quantity of loanable funds at a given point in time if interest rates are lower. III. Government demand for loanable funds increases when planned expenditures are not covered by incoming revenues and when interest rate decreases. IV. A country's demand for foreign funds depends on the interest rate differential between the two.
ssess the following statements: 1. At any moment in time, households (in aggregate) demand a greater quantity of loanable funds at lower rates of interest; in other words, they are willing to borrow more money at lower interest rates. II. Business investment in new projects should be greater when interest rates are low, as the cost of financing potential projects should be low. Consequently, businesses will demand a greater quantity of loanable funds at a given point in time if interest rates are lower. III. Government demand for loanable funds increases when planned expenditures are not covered by incoming revenues and when interest rate decreases. IV. A country's demand for foreign funds depends on the interest rate differential between the two.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Assess the following statements:
1. At any moment in time, households (in aggregate) demand a greater quantity of
loanable funds at lower rates of interest; in other words, they are willing to borrow
more money at lower interest rates.
II. Business investment in new projects should be greater when interest rates are low, as
the cost of financing potential projects should be low. Consequently, businesses will
demand a greater quantity of loanable funds at a given point in time if interest rates
are lower.
III. Government demand for loanable funds increases when planned expenditures are not
covered by incoming revenues and when interest rate decreases.
IV. A country's demand for foreign funds depends on the interest rate differential between
the two.
Three statements are correct.
O Only one statement is correct.
OTWO statements are correct.
O All statements are correct.
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