PS_CH1_ANS - Chapter I Problem Set ECO 21000 Money and Banking 28 August 2015 1 The basic function of nancial markets is to transfer money from Answer

PS_CH1_ANS - Chapter I Problem Set ECO 21000 Money and...

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Chapter I Problem Set ECO 21000: Money and Banking 28 August 2015 1. The basic function of financial markets is to transfer money from to . Answer: savers (people with excess funds) to borrowers/investors (people with a shortage of funds) 2. What do we call the price paid for the rental of borrowed funds (usually expressed as apercentage of the rental of$100 per year)? A)inflation rate.B)exchange rate.C)interest rate.D)aggregate price level.Answer:interest rate 3. Everything else held constant, what would be the impact on the housing market be givena decline in interest rate? Specifically, how will it impact spending? Answer:riseAnswer: EncourageA)increases the cost of a college education.B)reduces the cost of a college education.C)has no eect on educational costs.D)increases costs for students with no loans.Answer:A 4. An increase in interest rates might saving because more can be earned in interest income. 5. Everything else held constant, an increase in interest rates on student loans
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