Capital Market
What role do interest rates play in allocating capital to different potential borrowers?
What happens to market-clearing, or equilibrium, interest rates in a capital market when the demand for funds declines?
What happens when expected inflation increases or decreases?
How does the price of capital tend to change during a boom or a recession?
How does risk affect interest rates?
If inflation during the last 12 months was 2 percent and the interest rate during that period was 5 percent, what was the real rate of interest? If inflation is expected to average 4 percent during the next year and the real rate is 3 percent, what should the current rate of interest be?
What happens to market-clearing, or equilibrium, interest rates in a capital market when the demand for funds declines?
