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Question

11.An upward shift in the supply of loanable funds is likely to increase interest rates.

12.An increase in rates of return on real capital investment will increase real interest rates.

13.An increase in the desired saving rate will increase real interest rates.

14.Deficit spending units supply loanable funds.

15.If yields on thirty-year U. S. Treasury bonds are 8% and the real rate of interest is estimated at 3%, the historical rate of inflation is 5%.

16.The Fisher Effect holds that nominal interest rates include an expected inflation rate.

17.Economic models and flow-of-funds are two ways of forecasting interest rates.

18.Economic models forecast interest rates then estimate measures of economic output.

19.The flow of funds forecasting method utilizes the concept of supply and demand of loanable funds.

20.Interest rate forecasting using economic models assumes that financial markets are very efficient.

21.Nominal rates generally exceed the real rate.

22.If a security's realized return is negative, the expected return was smaller than the required return.

23.In 2010 and 2011, Federal Reserve announced quantitative easing’s, or QEs, which is to create money. This would lead to interest rates increase.

24.For a investment project to be accepted by management, its return must exceed the firm’s cost of capital.

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