A basic difference between a capital good and an intermediate good is that an intermediate good is used up or transformed in the production process while a capital good is not.

Which of the following is not a component of the demand for loanable funds?

A. Household purchases of housing and durable consumer goods. B. Business purchases of capital goods. C. Government financing of the public debt. D. Household saving.

As a result of increased tensions in the Middle East, oil production is down by 1.21 million barrels per day—a 5 percent reduction in the world’s supply of crude oil. Explain the likely impact of this event on the market for gasoline and the market for small cars.

What will be an ideal response?