BNAD 301 EXAM 3 QUESTIONS AND ANSWERS
Market for loans - CORRECT ANSWER✅✅Broad market where dollars now are exchanged for dollars in
the future.
Purpose of market for loans - CORRECT ANSWER✅✅Brings borrowers and lenders together.
Second purpose of loan market - CORRECT ANSWER✅✅Spreads risk of large projects.
Price in loan market - CORRECT ANSWER✅✅The nominal interest rate.
Annualized interest rate - CORRECT ANSWER✅✅The standard interest rate used in loan markets.
Reason for one representative rate - CORRECT ANSWER✅✅Rates tend to move together.
Suppliers in loan market - CORRECT ANSWER✅✅People willing to lend money.
Demanders in loan market - CORRECT ANSWER✅✅People willing to borrow money.
Net demand curve - CORRECT ANSWER✅✅Demand minus supply for loans.
Law of demand in loan market - CORRECT ANSWER✅✅Net demand decreases as interest rates rise.
Equilibrium interest rate - CORRECT ANSWER✅✅Rate where net demand equals zero.
High interest rates effect - CORRECT ANSWER✅✅Creates excess supply of loans.
Low interest rates effect - CORRECT ANSWER✅✅Creates excess demand for loans.
, Adjustment in loan market - CORRECT ANSWER✅✅Market forces push toward equilibrium.
Loan quantity meaning - CORRECT ANSWER✅✅Purely financial measure, not real output.
Purpose of loan market diagram - CORRECT ANSWER✅✅To study equilibrium interest rates.
Anticipated recession impact - CORRECT ANSWER✅✅Firms borrow less → ND shifts left.
Consumer behavior before recession - CORRECT ANSWER✅✅Borrow less to be cautious.
Result of recession expectations - CORRECT ANSWER✅✅Interest rates fall.
Borrowing during recession - CORRECT ANSWER✅✅Weak firms and households may borrow more.
Government borrowing in recession - CORRECT ANSWER✅✅Increases due to automatic stabilizers.
Net effect of recession - CORRECT ANSWER✅✅Interest rates usually continue falling.
Fiscal stimulus effect - CORRECT ANSWER✅✅Increases government borrowing and ND.
Yield curve - CORRECT ANSWER✅✅Relationship between yields on bonds of different maturities.
Inverted yield curve - CORRECT ANSWER✅✅Occurs when short-term rates are expected to fall.
Interpretation of inverted yield curve - CORRECT ANSWER✅✅Market expects a recession.
Components of loan market - CORRECT ANSWER✅✅Debt, equity, insurance.
Market for loans - CORRECT ANSWER✅✅Broad market where dollars now are exchanged for dollars in
the future.
Purpose of market for loans - CORRECT ANSWER✅✅Brings borrowers and lenders together.
Second purpose of loan market - CORRECT ANSWER✅✅Spreads risk of large projects.
Price in loan market - CORRECT ANSWER✅✅The nominal interest rate.
Annualized interest rate - CORRECT ANSWER✅✅The standard interest rate used in loan markets.
Reason for one representative rate - CORRECT ANSWER✅✅Rates tend to move together.
Suppliers in loan market - CORRECT ANSWER✅✅People willing to lend money.
Demanders in loan market - CORRECT ANSWER✅✅People willing to borrow money.
Net demand curve - CORRECT ANSWER✅✅Demand minus supply for loans.
Law of demand in loan market - CORRECT ANSWER✅✅Net demand decreases as interest rates rise.
Equilibrium interest rate - CORRECT ANSWER✅✅Rate where net demand equals zero.
High interest rates effect - CORRECT ANSWER✅✅Creates excess supply of loans.
Low interest rates effect - CORRECT ANSWER✅✅Creates excess demand for loans.
, Adjustment in loan market - CORRECT ANSWER✅✅Market forces push toward equilibrium.
Loan quantity meaning - CORRECT ANSWER✅✅Purely financial measure, not real output.
Purpose of loan market diagram - CORRECT ANSWER✅✅To study equilibrium interest rates.
Anticipated recession impact - CORRECT ANSWER✅✅Firms borrow less → ND shifts left.
Consumer behavior before recession - CORRECT ANSWER✅✅Borrow less to be cautious.
Result of recession expectations - CORRECT ANSWER✅✅Interest rates fall.
Borrowing during recession - CORRECT ANSWER✅✅Weak firms and households may borrow more.
Government borrowing in recession - CORRECT ANSWER✅✅Increases due to automatic stabilizers.
Net effect of recession - CORRECT ANSWER✅✅Interest rates usually continue falling.
Fiscal stimulus effect - CORRECT ANSWER✅✅Increases government borrowing and ND.
Yield curve - CORRECT ANSWER✅✅Relationship between yields on bonds of different maturities.
Inverted yield curve - CORRECT ANSWER✅✅Occurs when short-term rates are expected to fall.
Interpretation of inverted yield curve - CORRECT ANSWER✅✅Market expects a recession.
Components of loan market - CORRECT ANSWER✅✅Debt, equity, insurance.
