The quantity of loanable funds supplied increases if the real ...

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The quantity of loanable funds supplied increases if the real interest rate rises, all other things remaining the same, because the
 
  A) real interest rate is the opportunity cost of saving.
  B) real interest rate is inversely related to the cost of buying on credit.
  C) real interest rate is the opportunity cost of consumption.
  D) cost of living is determined by the real interest rate.
  E) demand for investment increases when the real interest rate rises.

Question 2

Discuss the link between real GDP and imports.
 
  What will be an ideal response?

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Answer to Question 1

C

Answer to Question 2

Imports are one of two components that are influenced by changes in U.S. real GDP and so imports are referred to as an induced expenditure. Other things the same, an increase in U.S. real GDP leads to an increase in U.S. imports. As U.S. income increases, households purchase more domestic as well as more foreign goods and services.

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Excellent

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