4..2 Demand and Supply in Financial Markets

Question 1

_____ are those who supply capital and those who borrow capital in hopes to expect a rate of return.

Answer 1

Demand and Supply in Financial Markets

Question 2

_______ simplest rate of return

Answer 2

interest rate

Question 3

How does the Law of Demand apply to financial markets?

Answer 3

A higher rate of return (price in financial markets) iwill decrease quantity demanded
Interest Rises = Reduction in borrowing

Question 4

How does the law of Supply apply in financial markets?

Answer 4

Higher Price = Increase in quantity supplied

Question 5

What is surplus in financial markets?

Answer 5

when interest is above the equilibrium level

Question 6

_______ will push the interest rate down toward the equilibruim level

Answer 6

Lowering Interest rates

Question 7

________ is thinking of how goods will be consumed now and in the future;
making decisions across time

Answer 7

Intertemporal Decision Making

Question 8

What can cause a shift in the supply to financial capital>

Answer 8

1. present needs; if the perceived situation changes, they amount saved is changed
   .= reduced savings supply of financial capital shifts the supply curve of financial capital at any interest rate to the left
   2.greater quantity demanded for financial capital when repayment can be met
   =will cause the supply curve for financial capital demanded at any given interest rate to shift the right

Question 9

a price ceiling that is set at a relatively high level in _____ and will have no practical effect unless the equilibrium prices soars higher enough to exceed the price ceiling

Answer 9

Non-binding