Question

The federal government demand for funds is said to be interest-inelastic, or ____ to interest rates. a. sensitive b. relatively sensitive as compared to other sectors c. insensitive d. None of these choices are correct.

Answer 1

Answer:

The correct answer is option c.

Explanation:

The federal government demand for loanable funds is said to be insensitive to interest rate or interest inelastic. This means that changes in the interest rate will not affect the demand for funds.  

This is because the government expenditures are planned are not likely to change with change in interest rates. The consumers' demand for loanable funds is likely to be inversely related to the interest rate.