Which of the following would cause the demand for loanable funds to increase?

a) A reduction in consumer confidence that causes people to save more.

b) A new investment tax credit for businesses to expand.

c) A major sporting event in town that causes people to withdrawl money from their bank accounts.

d) A reduction in government spending.

Which of the following is not a major role of financial institutions?

a) It seeks to minimize interest rates that it pays to savers.

b) It seeks to diversify assets to reduce risk.

c) It seeks to minimize transaction costs.

d) It seeks to minimize information costs.

Martha needs to acquire funds in order to expand her bakery. She does not want to give up control of her business, but her credit score is weak due to the recent foreclosure of her house. What should Martha do to acquire these funds?

a) Issue stock to willing investors.

b) Borrow money from her local bank.

c) Issue bonds to willing investors.

d) She should do all of the above.

Which of the following assets will likely show the greatest increase in value over time?

a) Savings accounts

b) Treasury bonds

c) Blue-chip stocks

d) Low-risk corporate bonds

When the stock market is rising rapidly, what tends to happen to bond prices and interest rates on bonds?

a) Bond prices rise and interest rates on bonds fall.

b) Bond prices rise and interest rates on bonds rise as well.

c) Bond prices fall and interest rates on bonds fall as well.

d) Bond prices fall and interest rates on bonds rise.