Question

Four fundamental factors affect the supply of, and demand for, investment capital, hence the -Select- of money. These factors are: production opportunities, time preferences for consumption, risk, and inflation. If the entire population was living at the subsistence level, time preferences for current consumption would be -Select- , savings would be -Select- , interest rates would be -Select- , and capital formation would be -Select- . Producers' expected returns on their business investments set a(n) -Select- limit on how much they can pay for savings, while consumers' time preferences for consumption establish how much consumption they are willing to delay, and, consequently, how much they will -Select- at different interest rates. In addition, -Select- risk and -Select- inflation lead to higher interest rates. Determine whether each of the statements below is true or false:

Answer 1

Incomplete question. The complete question reads;

• Four fundamental factors affect the supply of, and demand for, investment capital, hence the____of money.
• These factors are: production opportunities, time preferences for consumption, risk, and inflation. If the entire population was living at the subsistence level, time preferences for current consumption would be ___, savings would be ____, interest rates would be ___, and capital formation would be _____.
• Producers' expected returns on their business investments set a(n) ____ limit on how much they can pay for savings, while consumers' time preferences for consumption establish how much consumption they are willing to delay, and, consequently, how much they will ....... at different interest rates. In addition, ___risk and____inflation lead to higher interest rates

Answer:

• cost
• high, low, high, difficult
• upper, save, higher, higher

Step-by-step explanation:

After filling the blanks with the words above we can reach the conclusion that each statement is true. For example, if we consider the statement,

"Producers' expected returns on their business investments set a(n) upper limit on how much they can pay for savings," we would agree that because they want to make a profit the producers try to reduce cost by setting an upper limit of how much they can pay.