Borrowing to fund investment projects until the marginal rate of return falls to ________ is optimizing investment strategy for ________
A) the borrowing rate, businesses and governments
B) the borrowing rate, businesses but not governments
C) the borrowing rate, governments but not businesses
D) zero, businesses and governments
E) zero, governments but not businesses
A
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If the real interest rate in the domestic loanable funds market increases,
a. firms will have an added incentive to undertake investment projects. b. households will save less. c. the net inflow of foreign capital will tend to increase. d. it will be cheaper to purchase goods and services now rather than in the future.
If reserves increase by $7 million and the required reserve ratio is 12%, what is the resulting change in checkable deposits (or the money supply), assuming that there are no cash leakages and that banks hold zero excess reserves?
A) $0.84 million B) $7.95 million C) $5.83 million D) $58.33 million