In nations where the supply of real loanable funds is inelastic, the real risk-free interest rate is likely to:
a. To fluctuate more than the equilibrium quantity of loanable funds per period.
b. Be very stable over time and not to react strongly on changes in demand.
c. Be high compared to countries where the supply of real loanable funds is elastic.
d. None of the above.
Question 2 - What is a shortcoming of price control legislation?
a. Price controls lower the quantity demanded.
b. Price controls often lead to reduced product quality.
c. Price controls create surpluses.
d. All of the above are shortcomings of price controls.
Question 3 - Which of the following statements about the real loanable funds market is not true?
a. Movements in the real risk-free interest rate cause significant changes in borrowers' willingness and ability to tap the domestic credit market if the demand is highly elastic.
b. The more elastic a nation's supply of real loanable funds, the less sensitive domestic savers, banks, foreigners, and governments are to changes in the real risk-free interest rate.
c. Monetary policy is usually stronger in nations with elastic real loanable funds demands.
d. Fiscal policy is usually weaker in nations with elastic loanable funds demands.
e. All of the above are true.
Question 4 - What is a shortcoming of price control legislation?
a. Price controls create surpluses.
b. Price controls lower the quantity demanded.
c. Price controls create shortages.
d. All of the above are shortcomings of price controls.
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