Question

Which of the following chains of logic explain the functions of banks in the process of economic growth?

		Savers deposit their savings in banks. Banks direct these funds to firms that invest and engage in capital accumulation that furthers economic growth.
		Savers deposit their savings in banks. Banks engage in capital accumulation, which plays an important role in economic growth.
		Firms borrow from stock and bond markets. These funds are used for investment, which leads to the capital accumulation that furthers economic growth.
		The demand for loanable funds shows an inverse relationship between the real interest rate that banks charge and the quantity of loans demanded.

During a financial crisis in the early 2000s, the government of Argentina partially froze bank accounts for a year. Given the supply of saving and the demand to borrow functions, we would expect this action to cause the interest rate to

		increase and borrowing to increase.
		increase and borrowing to decrease.
		decrease and borrowing to decrease.
		decrease and borrowing to increase.

Which of the following chains of logic explain the functions of banks in the process of economic growth?

		Savers deposit their savings in banks. Banks direct these funds to firms that invest and engage in capital accumulation that furthers economic growth.
		Savers deposit their savings in banks. Banks engage in capital accumulation, which plays an important role in economic growth.
		Firms borrow from stock and bond markets. These funds are used for investment, which leads to the capital accumulation that furthers economic growth.
		The demand for loanable funds shows an inverse relationship between the real interest rate that banks charge and the quantity of loans demanded.

During a financial crisis in the early 2000s, the government of Argentina partially froze bank accounts for a year. Given the supply of saving and the demand to borrow functions, we would expect this action to cause the interest rate to

		increase and borrowing to increase.
		increase and borrowing to decrease.
		decrease and borrowing to decrease.
		decrease and borrowing to increase.

4 points

Question 25

Imported goods consumed in the United States are counted as part of the U.S. GDP.

True

False

Imported goods consumed in the United States are counted as part of the U.S. GDP.

True

False

Answer 1

a) "A"

Savers deposit their savings in banks. Banks direct these funds to firms that invest and engage in capital accumulation that furthers economic growth.

Banks act as a mediator between the savers and people who want to borrow the funds and they circulate the money which increases the investment and create economic activity.

b) "Interest rates will decrease and the borrowing will increase."

Increased supply of saving will decrease the interest rates in the market and at a lower rate, the investment or borrowing will increase.

c) "False"

Imported goods are not part of US GDP.

d)