What does it mean when we say that individuals as a group are net suppliers of...
What does it mean when we say that individuals as a group are net suppliers of funds for financial institutions? What do you think the consequences might be in financial markets if individuals consumed more of their incomes and thereby reduced the supply of funds available to financial institutions?
What does it mean when we say that individuals as a group are net suppliers of funds for financial institutions? (Select the best answer below.)
A.
Individuals, as a whole, spend more than they make. The excess is provided for by financial institutions.
B.
Individuals, as a whole, spend more than they make. The excess is provided for by businesses.
C.
Individuals, as a whole, spend less than they make. The amount that they spend is made available to businesses through financial institutions.
D.
Individuals, as a whole, spend less than they make. The excess is invested, making it available for businesses and governments.
What do you think the consequences might be in financial markets if individuals consumed more of their incomes and thereby reduced the supply of funds available to financial institutions? (Select the best answers from the drop-down menus.)
If individuals consume more,
▼
dollars will be available for investment. This would
▼
increase
reduce
the amount of money available for new projects and drive
▼
down
up
the required return (i.e., required return of investors to buy bonds). Over time, employment, salaries, and gross domestic product would
▼
decline
rise
.
Click to select your answer.
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Homework Answers
1. Option D, Individuals, as a whole, spend less than they make. The excess is invested, making it available for businesses and governments.
2. If individuals consume more fewer dollars will be available for investment. This would reduce the amount of money available for new projects and drive up the required return (i.e., required return of investors to buy bonds). Over time, employment, salaries, and gross domestic product would decline.
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