in response to a particularly exciting speech by the president of hamsterville, business optimism is at an…
in response to a particularly exciting speech by the president of hamsterville, business optimism is at an all - time high, and the demand for capital has increased. what will be the impact of this increase in the demand for capital on the market for loanable funds and the stock of capital in hamsterville? choose 1 answer: a demand and supply of loanable funds will increase; stock of capital will not be affected. b supply of loanable funds will decrease; stock of capital will increase. c supply of loanable funds will increase; stock of capital will not be affected. d demand for loanable funds will increase; stock of capital will increase. e demand for loanable funds will increase; stock of capital will decrease.
Answer
Brief Explanations:
When business optimism is high and demand for capital increases, businesses want more funds to invest. This leads to an increase in the demand for loanable funds. In the short - run, the stock of capital does not immediately change as it takes time to build or acquire new capital goods. So, the demand for loanable funds will increase while the stock of capital remains unaffected initially.
Answer:
D. Demand for loanable funds will increase; stock of capital will not be affected.