Ch01 - Answers to End-of-Chapter Questions 1. Because they...

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Answers to End-of-Chapter Questions 1. Because they channel funds from those who do not have a productive use for them to those who do, thereby resulting in higher economic efficiency. 2. Businesses would cut investment spending because the cost of financing this spending is now higher, and consumers would be less likely to purchase a house or a car because the cost of financing their purchase is higher. 3. A change in interest rates affects the cost of acquiring funds for financial institution as well as changes the income on assets such as loans, both of which affect profits. In addition, changes in interest rates affect the price of assets such as stock and bonds that the financial institution owns which can lead to profits or losses. 4. No. People who borrow to purchase a house or a car are worse off because it costs them more to finance their purchase; however, savers benefit because they can earn higher interest rates on their savings.
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Ch01 - Answers to End-of-Chapter Questions 1. Because they...

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