Exam 2: Determination of Interest Rates

At any given point in time, households would demand a ____ quantity of loanable funds at ____ rates of interest.

The relationship between interest rates and expected inflation is often referred to as the loanable funds theory.

The demand for funds resulting from business investment in short-term assets is ____ related to the number of projects implemented, and is therefore ____ related to the interest rate.

In general, suppliers of loanable funds are willing to supply more funds if the interest rate is higher.

Which of the following is likely to cause a decrease in the equilibrium U.S. interest rate, other things being equal?

If the federal government needs to borrow additional funds, this borrowing reflects a(n) ____ in the supply of loanable funds and a(n) ____ in the demand for loanable funds.

If interest rates are ____, ____ projects will have positive NPVs.

Other things being equal, a smaller quantity of U.S. funds would be demanded by foreign governments and corporations if their domestic interest rates were high relative to U.S. rates.

The equilibrium interest rate

The equilibrium interest rate should

The level of installment debt as a percentage of disposable income is generally ____ during recessionary periods.

Forecasters should consider future plans for corporate expansion and the future state of the economy when forecasting business demand for loanable funds.

The quantity of loanable funds supplied is normally

If the federal government reduces its budget deficit, this causes a(n) ____ in the supply of loanable funds and a(n) ____ in the demand for loanable funds.

If foreign interest rates fall, foreign firms and governments would likely reduce their demand for U.S. funds.

According to the loanable funds theory, market interest rates are determined by the factors that control the supply of and demand for loanable funds.

The federal government's demand for loanable funds is ____. If the budget deficit is expected to increase, the federal government's demand for loanable funds would ____.

As a result of more favorable economic conditions, there is a(n) ____ demand for loanable funds, causing an ____ shift in the demand curve.

The Fisher effect states that the

The federal government demand for funds is said to be interest-inelastic, or ____ to interest rates.