ECON 201 Lecture Notes - Lecture 1: Loanable Funds, Consumption Smoothing, Usury

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scarletimpala928

5 Dec 2017

School

Ball State University

Department

Economics

Course

ECON 201

Professor

Curott

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Document Summary

Positive interest rate stems from the fact that people are impatient. Net demanders: in equilibrium, savings = investment, every dollar borrowed requires a dollar saved. Factors that affect demand for loanable funds: productivity of capital, investor confidence, income and wealth, time preferences, demographic changes. More patient (preference is lower) the supply of loanable funds increases (shifts right) People generally like to smooth consumption over the lifecycle. Investment demand for loans comes from desire to borrow. Increase in profitability of capital investment increases the demand for loanable funds. If a firm thinks the economy will grow in the future, it will be more comfortable borrow more today for capital investing, increasing demand. Investor confidence tends to decline when the economy slows. Best measure of economic well being of average citizen. Things that don"t have market value are excluded. Gdp: the market value of all final goods and services produced within a country in a given period of time.

Related Questions

QUESTION 11

If the demand for investment loans rises, this could be the result of

		the discovery of new and better roundabout methods of production.
		a lower rate of time preference in society.
		a lower interest rate.
		a higher interest rate.
		a and c

1 points

QUESTION 12

Which of the following statements is true?

		All persons have a high rate of time preference.
		People with a high rate of time preference are more likely to be borrowers than people with a low rate of time preference.
		People with a high rate of time preference are more likely to be lenders than people with a low rate of time preference.
		A high interest rate is the cause of a high rate of time preference.
		none of the above

1 points

QUESTION 13

Which of the following statements is true?

		The nominal interest rate is always higher than the real interest rate since the nominal interest rate equals the real interest rate plus the expected inflation rate.
		The nominal interest rate is always lower than the real interest rate since the nominal interest rate equals the real interest rate minus the expected inflation rate.
		The nominal interest rate can equal the real interest rate, but to do so the expected inflation rate must be zero percent.
		It is the nominal interest rate-not the real interest rate-that matters to borrowers.

1 points

QUESTION 14

If there is an increase in the expected inflation rate, then,

		the supply and demand for loanable funds will decrease.
		the supply and demand for loanable funds will increase.
		the supply of loanable funds will decrease, and the demand for loanable funds will increase.
		the supply of loanable funds will increase, and the demand for loanable funds will decrease.

1 points

QUESTION 15

If suddenly a 4 percent inflation rate (instead of a zero percent inflation rate) is expected by both suppliers and demanders in the loanable funds market, then

		the demand for loanable funds curve will shift rightward, and the supply of loanable funds curve will shift leftward.
		the demand for loanable funds curve will shift leftward, and the supply of loanable funds curve will shift rightward.
		both the demand for loanable funds curve and the supply of loanable funds curve will shift leftward.
		both the demand for loanable funds curve and the supply of loanable funds curve will shift rightward.

ECON 201 Lecture Notes - Lecture 1: Loanable Funds, Consumption Smoothing, Usury

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