Chapter 7 Flashcards
Weath is…
the market value of what a household or a firm owns and what it owes
Saving is…
the amount of income that is paid in taxes or spent on consumption goods and services
Bonds are issued by…
firms and governments
True or False
The nomial interest rate is equal to the real interest rate
True
The quanity of loanable funds depends on…
the real interest rate and expected profit
What makes up the demand for loanable funds?
Business Investment
If expected profits go up the demand for loanable funds…
Increase
If expected profits go down, the demand for loanable funds…
Decrease
The quanity of loanable funds supplied is…
From private savings, the govy budget, and international borrowing
What makes up the supply of loanable funds?
Saving
What changes savings?
Disposible income, wealth Expected future income, Default risk
A govy budget surplus…
Increase the supply of loanable funds
A govy budget deficit…
Decrease the supply of loanable funds
Crowding out effect is…
The govy budget to increase the real interest rate and decrease investment
A govy budget surplus increases and decrease what?
Increase: Investment
Decrease: The real interest, Private Saving
