Fill-in-the-Blank
1. Fill in the blanks to make the following statements correct.
a. A firm’s demand for financial capital is derived from its
demand for.
b. A firm that decides to invest in additional machinery will
its requirement for financial capital.
c. An increase in the marginal product of capital will lead
firms to their desired capital stock and therefore
their demand for financial capital.
d. An increase in the interest rate will the present
value of capital’s MRP and therefore firms’
desired capital stock. The result will be a in the
quantity of financial capital demanded by firms.
e. An increase in capital’s MRP results in a in the
economy’s investment demand curve, whereas an
increase in the interest rate results in a the
economy’s investment demand curve.
2. Fill in the blanks to make the following statements correct.
a. An increase in the interest rate leads households to
their current spending and their current
saving. The result is a(n) in the quantity of
financial capital supplied.
b. An increase in current income leads to a(n) in
household saving at any given interest rate. This results