Exam 4: The Level of Interest Rates

An economic recession would be represented in loanable funds theory as

An increase (shift to right) in the supply of loanable funds (SL) may be related to all but one of the following:

Interest rates should decease if

Interest rates represent

Which of the following is more likely to affect long-term bond yields?

If expected inflation in a period exceeds actual inflation

If a security's realized return is negative, the expected return was smaller than the required return.

The realized real rate of interest can be negative if expected inflation is less than actual inflation.

Sam has just lent Mary $1000 for 1 year 6%. Sam and Mary expect inflation to be 3% over the next year. If inflation turns out to have been only 2%, what is the impact upon Sam and Mary?

Deficit spending units supply loanable funds.

Interest rates will decline when the demand for loanable funds

The real rate of interest can be viewed as the time value of not consuming.

An increase in income tax rates

Using loanable funds theory, discuss how changes in consumer savings, business investment, and in the money supply by the Federal Reserve System can influence the level of interest rates.

Which of the following is best associated with interest rate movements and inflation?

An upward shift in the supply of loanable funds is likely to increase interest rates.

All but one of the following affects the supply of loanable funds?

If the actual rate of inflation is less than the rate expected during a period,

Interest rates are directly related to inflation expectations and inversely related to the level of economic activity.

Which of the following best explains why public interest rate forecasts have a low rate of accuracy?