There are two aspects of efficiency that the equilibrium of market for loanable funds exhibits....

Question:

There are two aspects of efficiency that the equilibrium of market for loanable funds exhibits. Select the TWO statements that characterize these two aspects of efficiency.

- Investment projects that are financed have smaller rates of return than projects not receiving financing.

- Investment projects that are financed by savers have larger rates of returni than projects that do not receive financing.

- There is always a small surplus of funds in the market.

- Savers who lend money are willing to accept a higher minimum interest rate than potential savers who do not lend money

- All potential savers lend money.

- Savers who lend money are willing to accept a lower minimum interest rate than potential savers who do not lend money

Loanable Funds:

Loanable funds aim to include the credit types, which include the bonds, deposits or loans. It is a theory related to the market rate of interest and is determined by the supply of and demand for the loanable funds.

Answer and Explanation:

The two aspects of efficiency which the equilibrium of the market exhibits for the loanable funds include the financed investment projects possess a small rate of return in comparison to the projects that do not receive financing facilities and the savers who aim to lend money agree to accept low rate of interest that the savers who do not lend money. (Correct answer: 1 and 6)


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Loanable Funds: Definition & Theory

from Introduction to Business: Homework Help Resource

Chapter 25 / Lesson 29
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