Question 1

Which of the following influences household saving? I.The real interest rate
II.Disposable income
III.Expected future income

Accepted Answer

A) I only 
B) I and III only 
C) I and II only 
D) I, II, and III 
E) II and III only 
A) I only 
B) I and III only 
C) I and II only 
D) I, II, and III 
E) II and III only

Question 2

According to the Ricardo- Barro effect,

Accepted Answer

A) a government deficit decreases the supply of loanable funds. 
B) households increase personal saving when governments run budget deficits. 
C) government deficits raise the real interest rate. 
D) taxpayers fail to foresee that government deficits imply higher future taxes. 
E) government budget deficits increase households' expected future disposable income. 
A) a government deficit decreases the supply of loanable funds. 
B) households increase personal saving when governments run budget deficits. 
C) government deficits raise the real interest rate. 
D) taxpayers fail to foresee that government deficits imply higher future taxes. 
E) government budget deficits increase households' expected future disposable income.

Question 3

Which of the following is correct?

Accepted Answer

A) As disposable income increases, the real interest rate rises. 
B) As disposable income decreases, saving decreases. 
C) The higher a household's wealth the greater is its saving. 
D) Both B and C are correct. 
E) Both A and C are correct. 
A) As disposable income increases, the real interest rate rises. 
B) As disposable income decreases, saving decreases. 
C) The higher a household's wealth the greater is its saving. 
D) Both B and C are correct. 
E) Both A and C are correct.

Question 4

In January 2017, Tim's Gyms, Inc.owned machines valued at $1 million.During the year, the market value of the machines fell by 10 percent.During 2017, Tim spent $200,000 on new machines.During 2017, Tim's net investment was

Accepted Answer

A) $1.1 million. 
B) $300,000. 
C) $1 million. 
D) $200,000. 
E) $100,000. 
A) $1.1 million. 
B) $300,000. 
C) $1 million. 
D) $200,000. 
E) $100,000.

Question 5

Refer to the figure below to answer the following questions.
   Figure 7.3.2
-In Figure 7.3.2, investment is _______ and national saving is _______.

Accepted Answer

A) $20 billion; $20 billion 
B) $25 billion; $15 billion 
C) $15 billion; $25 billion 
D) $25 billion; $25 billion 
E) $20 billion; $15 billion 
A) $20 billion; $20 billion 
B) $25 billion; $15 billion 
C) $15 billion; $25 billion 
D) $25 billion; $25 billion 
E) $20 billion; $15 billion

Question 6

Use the table below to answer the following questions.
Table 7.2.1
The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule.
  
-Consider Table 7.2.1.What is the equilibrium quantity of investment?

Accepted Answer

A) $4.5 trillion 
B) $6.5 trillion 
C) $6.0 trillion 
D) $5.0 trillion 
E) $5.5 trillion 
A) $4.5 trillion 
B) $6.5 trillion 
C) $6.0 trillion 
D) $5.0 trillion 
E) $5.5 trillion

Question 7

Use the table below to answer the following questions.
Table 7.2.1
The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule.
  
-Consider Table 7.2.1.If planned saving increases by $0.5 trillion at each real interest rate, what is the new equilibrium real interest rate?

Accepted Answer

A) 5.5 percent a year 
B) 4.5 percent a year 
C) 5 percent a year 
D) 6.0 percent a year 
E) There is no new equilibrium real interest rate. 
A) 5.5 percent a year 
B) 4.5 percent a year 
C) 5 percent a year 
D) 6.0 percent a year 
E) There is no new equilibrium real interest rate.

Question 8

Refer to the figure below to answer the following questions.
   Figure 7.2.4
-In Figure 7.2.4, the economy is at point A.What happens if disposable income decreases?

Accepted Answer

A) Nothing; the economy would remain at point A. 
B) There is a movement to a point such as B. 
C) The supply of loanable funds curve becomes downward sloping. 
D) The supply of loanable funds curve shifts rightward to a curve such as SLF2. 
E) The supply of loanable funds curve shifts leftward to a curve such as SLF1. 
A) Nothing; the economy would remain at point A. 
B) There is a movement to a point such as B. 
C) The supply of loanable funds curve becomes downward sloping. 
D) The supply of loanable funds curve shifts rightward to a curve such as SLF2. 
E) The supply of loanable funds curve shifts leftward to a curve such as SLF1.

Question 9

At the beginning of the year, your wealth is $10,000.During the year, you have an income of $80,000 and you spend $90,000 on consumption goods and services.You pay no taxes.Your wealth at the end of the year is

Accepted Answer

A) $10,000. 
B) $20,000. 
C) $0. 
D) $90,000. 
E) $100,000. 
A) $10,000. 
B) $20,000. 
C) $0. 
D) $90,000. 
E) $100,000.

Question 10

If the economy's capital decreases over time,

Accepted Answer

A) depreciation exceeds gross investment. 
B) depreciation is less than zero. 
C) net investment is positive. 
D) gross investment equals net investment. 
E) gross investment is zero. 
A) depreciation exceeds gross investment. 
B) depreciation is less than zero. 
C) net investment is positive. 
D) gross investment equals net investment. 
E) gross investment is zero.

Question 11

A government budget deficit _______ the demand for loanable funds, _______ the real interest rate, and _______ investment.

Accepted Answer

A) decreases; increases; crowds out 
B) increases; increases; crowds out 
C) decreases; increases; increases 
D) increases; increases; increases 
E) increases; decreases; crowds out 
A) decreases; increases; crowds out 
B) increases; increases; crowds out 
C) decreases; increases; increases 
D) increases; increases; increases 
E) increases; decreases; crowds out

Question 12

During a recession, firms decrease their profit expectations.As a result, there is a _______ shift of the _______ loanable funds curve.

Accepted Answer

A) leftward; demand for 
B) leftward; demand for loanable funds curve and supply of 
C) rightward; demand for 
D) rightward, supply of 
E) rightward; supply of 
A) leftward; demand for 
B) leftward; demand for loanable funds curve and supply of 
C) rightward; demand for 
D) rightward, supply of 
E) rightward; supply of

Question 13

Which of the following is true? I.As the real interest rate increases, people increase the quantity they save.
II.The supply of loanable funds curve is downward sloping.
III.As disposable income increases, the supply of loanable funds curve becomes steeper.

Accepted Answer

A) II and III only 
B) I only 
C) III only 
D) I and III only 
E) I, II, and III 
A) II and III only 
B) I only 
C) III only 
D) I and III only 
E) I, II, and III

Question 14

Refer to the figure below to answer the following questions.
   Figure 7.2.3
-In Figure 7.2.3, the real interest rate is 6 percent a year and the economy is on curve DLF.The expected profit rises.With no change in the real interest rate, the new quantity of loanable funds demanded is

Accepted Answer

A) zero. 
B) less than $450 billion. 
C) greater than $450 billion. 
D) $450 billion. 
E) between $300 billion and $450 billion. 
A) zero. 
B) less than $450 billion. 
C) greater than $450 billion. 
D) $450 billion. 
E) between $300 billion and $450 billion.

Question 15

Refer to the figure below to answer the following questions.
   Figure 7.3.1
-Figure 7.3.1 shows the situation when the government has a budget _______ Investment is _______.

Accepted Answer

A) surplus; $10 billion 
B) deficit; $25 billion 
C) deficit; $20 billion 
D) deficit; $10 billion 
E) surplus; $25 billion 
A) surplus; $10 billion 
B) deficit; $25 billion 
C) deficit; $20 billion 
D) deficit; $10 billion 
E) surplus; $25 billion

Question 16

Refer to the table below to answer the following questions.
Table 7.1.1  
-Refer to Table 7.1.1.Private saving is

Accepted Answer

A) - $15 million. 
B) $40 million. 
C) $80 million. 
D) $20 million. 
E) $25 million. 
A) - $15 million. 
B) $40 million. 
C) $80 million. 
D) $20 million. 
E) $25 million.

Question 17

The Ricardo- Barro effect of a government budget deficit is

Accepted Answer

A) a decrease in private saving. 
B) a decrease in net exports. 
C) a large crowding- out effect that decreases national saving. 
D) an increase in private saving. 
E) a large crowding- out effect that decreases investment. 
A) a decrease in private saving. 
B) a decrease in net exports. 
C) a large crowding- out effect that decreases national saving. 
D) an increase in private saving. 
E) a large crowding- out effect that decreases investment.

Question 18

A decrease in the real interest rate leads to a _______ the demand for loanable funds curve, and a decrease in expected profit leads to a _______ the demand for loanable funds curve.

Accepted Answer

A) rightward shift of; movement up along 
B) movement down along; movement up along 
C) movement down along; leftward shift of 
D) rightward shift of; leftward shift of 
E) movement down along; rightward shift of 
A) rightward shift of; movement up along 
B) movement down along; movement up along 
C) movement down along; leftward shift of 
D) rightward shift of; leftward shift of 
E) movement down along; rightward shift of

Question 19

In January 2017, Tim's Gyms, Inc.owned machines valued at $1 million.During the year, the market value of the machines fell by 30 percent.During 2017, Tim spent $200,000 on new machines.During 2017, Tim's net investment was

Accepted Answer

A) $500,000. 
B) $100,000. 
C) - $100,000. 
D) $200,000. 
E) $300,000. 
A) $500,000. 
B) $100,000. 
C) - $100,000. 
D) $200,000. 
E) $300,000.

Question 20

A government budget deficit _______ the demand for loanable funds and _______ investment.

Accepted Answer

A) increases; decreases 
B) increases; increases 
C) decreases; decreases 
D) decreases; increases 
E) increases; rises or falls depending on the change in the supply of loanable funds 
A) increases; decreases 
B) increases; increases 
C) decreases; decreases 
D) decreases; increases 
E) increases; rises or falls depending on the change in the supply of loanable funds

Which of the following influences household saving? I.The real interest rate II.Disposable income III.Expected future income

According to the Ricardo- Barro effect,

Which of the following is correct?

In January 2017, Tim's Gyms, Inc.owned machines valued at $1 million.During the year, the market value of the machines fell by 10 percent.During 2017, Tim spent $200,000 on new machines.During 2017, Tim's net investment was

Refer to the figure below to answer the following questions. Figure 7.3.2 -In Figure 7.3.2, investment is _ and national saving is _.

Use the table below to answer the following questions. Table 7.2.1 The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule. -Consider Table 7.2.1.What is the equilibrium quantity of investment?

Refer to the figure below to answer the following questions. Figure 7.2.4 -In Figure 7.2.4, the economy is at point A.What happens if disposable income decreases?

At the beginning of the year, your wealth is $10,000.During the year, you have an income of $80,000 and you spend $90,000 on consumption goods and services.You pay no taxes.Your wealth at the end of the year is

If the economy's capital decreases over time,

A government budget deficit ___ the demand for loanable funds, _ the real interest rate, and _____ investment.

During a recession, firms decrease their profit expectations.As a result, there is a _ shift of the _ loanable funds curve.

Which of the following is true? I.As the real interest rate increases, people increase the quantity they save. II.The supply of loanable funds curve is downward sloping. III.As disposable income increases, the supply of loanable funds curve becomes steeper.

Refer to the figure below to answer the following questions. Figure 7.2.3 -In Figure 7.2.3, the real interest rate is 6 percent a year and the economy is on curve DLF.The expected profit rises.With no change in the real interest rate, the new quantity of loanable funds demanded is

Refer to the figure below to answer the following questions. Figure 7.3.1 -Figure 7.3.1 shows the situation when the government has a budget _ Investment is _.

Refer to the table below to answer the following questions. Table 7.1.1 -Refer to Table 7.1.1.Private saving is

The Ricardo- Barro effect of a government budget deficit is

A decrease in the real interest rate leads to a _ the demand for loanable funds curve, and a decrease in expected profit leads to a _ the demand for loanable funds curve.

In January 2017, Tim's Gyms, Inc.owned machines valued at $1 million.During the year, the market value of the machines fell by 30 percent.During 2017, Tim spent $200,000 on new machines.During 2017, Tim's net investment was

A government budget deficit _ the demand for loanable funds and _ investment.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 7: Finance, Saving, and Investment

Which of the following influences household saving? I.The real interest rate II.Disposable income III.Expected future income

According to the Ricardo- Barro effect,

Which of the following is correct?

In January 2017, Tim's Gyms, Inc.owned machines valued at $1 million.During the year, the market value of the machines fell by 10 percent.During 2017, Tim spent $200,000 on new machines.During 2017, Tim's net investment was

Refer to the figure below to answer the following questions. Figure 7.3.2 -In Figure 7.3.2, investment is _______ and national saving is _______.

Use the table below to answer the following questions. Table 7.2.1 The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule. -Consider Table 7.2.1.What is the equilibrium quantity of investment?

Refer to the figure below to answer the following questions. Figure 7.2.4 -In Figure 7.2.4, the economy is at point A.What happens if disposable income decreases?

At the beginning of the year, your wealth is $10,000.During the year, you have an income of $80,000 and you spend $90,000 on consumption goods and services.You pay no taxes.Your wealth at the end of the year is

If the economy's capital decreases over time,

A government budget deficit _______ the demand for loanable funds, _______ the real interest rate, and _______ investment.

During a recession, firms decrease their profit expectations.As a result, there is a _______ shift of the _______ loanable funds curve.

Which of the following is true? I.As the real interest rate increases, people increase the quantity they save. II.The supply of loanable funds curve is downward sloping. III.As disposable income increases, the supply of loanable funds curve becomes steeper.

Refer to the figure below to answer the following questions. Figure 7.2.3 -In Figure 7.2.3, the real interest rate is 6 percent a year and the economy is on curve DLF.The expected profit rises.With no change in the real interest rate, the new quantity of loanable funds demanded is

Refer to the figure below to answer the following questions. Figure 7.3.1 -Figure 7.3.1 shows the situation when the government has a budget _______ Investment is _______.

Refer to the table below to answer the following questions. Table 7.1.1 -Refer to Table 7.1.1.Private saving is

The Ricardo- Barro effect of a government budget deficit is

A decrease in the real interest rate leads to a _______ the demand for loanable funds curve, and a decrease in expected profit leads to a _______ the demand for loanable funds curve.

In January 2017, Tim's Gyms, Inc.owned machines valued at $1 million.During the year, the market value of the machines fell by 30 percent.During 2017, Tim spent $200,000 on new machines.During 2017, Tim's net investment was

A government budget deficit _______ the demand for loanable funds and _______ investment.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Refer to the figure below to answer the following questions. Figure 7.3.2 -In Figure 7.3.2, investment is _ and national saving is _.

A government budget deficit ___ the demand for loanable funds, _ the real interest rate, and _____ investment.

During a recession, firms decrease their profit expectations.As a result, there is a _ shift of the _ loanable funds curve.

Refer to the figure below to answer the following questions. Figure 7.3.1 -Figure 7.3.1 shows the situation when the government has a budget _ Investment is _.

A decrease in the real interest rate leads to a _ the demand for loanable funds curve, and a decrease in expected profit leads to a _ the demand for loanable funds curve.

A government budget deficit _ the demand for loanable funds and _ investment.