Ford Motor Corporation is considering purchasing new technology that will increase productivity by twenty percent.If Ford Motor Corporation decides to make this investment at the going real interest rate, then
A) the quantity of loanable funds demanded increases.
B) the supply of loanable funds increases.
C) the demand for loanable funds increases.
D) Ford's profits will decline.
E) saving increases.

Question

Quizplus · Accepted Answer

The purchase of new technology by Ford Motor Corporation will require funding, therefore the demand for loanable funds will increase. The increase in productivity may eventually lead to higher profits for the company, but it is not directly related to the demand for loanable funds. The supply of loanable funds is not affected by this decision, and it is not clear whether savings will increase or not.

Ford Motor Corporation Is Considering Purchasing New Technology That Will