(Investment/saving) is the source of the demand for loanable funds. As the inter

Question

(Investment/saving) is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demande ( dincreases/ increases) .

Suppose the interest rate is 2.5%. Based on the previous graph, the quantity of loanable funds supplied is (less/greater) than the quantity of loans demanded, resulting in a (surplus/shortage) of loanable funds. This would encourage lenders to (raise/lower) the interest rates they charge, thereby (incerceasing/decreasing) the quantity of loanable funds supplied and (incerceasing/decreasing) the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of ........%

The shape of your utility function implies that you are a (risk-friendly/risk-averse) individual, and, therefore, you

(would/world not) accept the wager because the difference in utility between C and A is (less than/greater) the difference between A and B.

Which of the following best explain why the pain of losing $3,000 exceeds the pleasure of winning $3,000 for risk-averse people? Check all that apply.

A.Risk-averse people overestimate the probability of losing money.

B.Risk-averse people are relatively wealthy and simply do not need the additional money.

C.The more wealth that risk-averse people have, the more satisfaction they receive from an additional dollar.

D.The more wealth that risk-averse people have, the less satisfaction they receive from an additional dollar.

4) The Federal Reserve's organization

There are Federal Reserve regional banks.

Which of the following is a responsibility of the Federal Open Market Committee (FOMC)?

Buying and selling stocks

Issuing mortgages to homeowners

Making decisions regarding monetary policy

The Federal Reserve's primary tool for changing the money supply is (the discount rate/open market/operations/the reserve requriremnt ) . In order to increase the number of dollars in the U.S. economy (the money supply), the Federal Reserve will (buy/sell) government bonds.

5) The discount rate and the federal funds rate

The discount rate is the interest rate on loans that the Federal Reserve makes to banks. Banks occasionally borrow from the Federal Reserve when they find themselves short on reserves. A lower discount rate (increases/decreases) banks' incentives to borrow reserves from the Federal Reserve,thereby (increasing/decreasing) the quantity of reserves in the banking system and causing the money supply to (rise/fall) .The federal funds rate is the interest rate that banks charge one another for short-term (typically overnight) loans. When the Federal Reserve uses open-market operations to sell government bonds, the quantity of reserves in the banking system (decreases/increases) , banks' need to borrow from each other(declines/rises) , and the federal funds rate (decreases/increases) .

1. Financial institutions in the U.S. economy Suppose Manuel would like to invest $10,000 of his savings. One way of investing is to purchase stock or bonds from a private company. Suppose Nanospeck, a biotechnology firm, is selling stocks to raise money for a new lab-a practice known as equityfinance. Buying a share of NanoSpeck stock would give Manuel a claim to partial ownership in ? the firm In the event that NanoSpeck runs into financial difficulty, the bondholders will be paid first. Suppose Manuel decides to buy 100 shares of NanoSpeck stock Which of the following statements are correct? Check all that apply. NanoSpeck earns revenue when Manuel purchases 100 shares, even if he purchases them from an existing shareholder. Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Manuel's shares to decline. The price of his shares will rise if NanoSpeck issues additional shares of stock. Alternatively, Manuel could invest by purchasing bonds issued by the government of Japan. Assuming that everything else is equal, a bond issued by a government that is engaged in a c wil wa most a h gher ? nte est rate than a bond issued by the government of Japan

Explanation / Answer

1.

Equity

Claim to partial ownership

The bondholders

(Buying shares and making investment is called equity investment that brings partial ownership to the company. Though, at the time of winding up, the first preference is given to the bondholders.)

Correct Answer:

B

With the company running into the difficulties, there will be negativity in the shareholders and supply of shares of the particular company increases. It leads to the decrease I share price of the company.

Correct Answer:

Higher

A war ravaged country demands funds and are willing to pay the higher interest rates.

2.

Investment

Increases

Less

Shortage

Raise

Increasing

Decreasing

3%

For investment purpose, firms demand funds in the market. Here, the quantity demanded curve is downward sloping. It means that quantity demanded increases with decrease in interest rates. but, loanable funds supplied, decreases with decrease in interest rate. Hence, a shortage is created at lower than the equilibrium interest rate. It makes upward pressure upon the interest rate and pushes it back to the equilibrium interest rate level.

Pl. repost other unanswered questions for their proper answers!

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.