Question 1

As the _______ interest rate rises _______.

Accepted Answer

A) real; a movement occurs up along the demand for loanable funds curve 
B) nominal; the demand for loanable funds curve shifts leftward 
C) real; the demand for loanable funds curve shifts rightward 
D) nominal; the demand for loanable funds curve shifts rightward 
E) real; a movement occurs down along the demand for loanable funds curve 
A) real; a movement occurs up along the demand for loanable funds curve 
B) nominal; the demand for loanable funds curve shifts leftward 
C) real; the demand for loanable funds curve shifts rightward 
D) nominal; the demand for loanable funds curve shifts rightward 
E) real; a movement occurs down along the demand for loanable funds curve

Question 2

In 2017, Tim's Gyms finances the building of a new gym.Tim secures this financing from a bank, and the bank receives ownership if Tim fails to make payments.This source of funds is

Accepted Answer

A) a bond issued in the bond market. 
B) a stock issued in the bond market. 
C) a mortgage obtained in the loan market. 
D) a mortgage obtained in the stock market. 
E) a stock issued in the loan market. 
A) a bond issued in the bond market. 
B) a stock issued in the bond market. 
C) a mortgage obtained in the loan market. 
D) a mortgage obtained in the stock market. 
E) a stock issued in the loan market.

Question 3

If national saving equals $100,000, net taxes equal $100,000 and government expenditure equals $25,000, what is private saving?

Accepted Answer

A) $25,000 
B) $175,000 
C) - $25,000 
D) $225,000 
E) zero 
A) $25,000 
B) $175,000 
C) - $25,000 
D) $225,000 
E) zero

Question 4

At the beginning of the year, Tom's Tubes has capital of 5 tube- inflating machines.During the year, Tom scraps 2 old machines and purchases 3 new machines.Tom's capital at the end of year is

Accepted Answer

A) 8 machines. 
B) 6 machines. 
C) 2 machines. 
D) 1 machine. 
E) 3 machines. 
A) 8 machines. 
B) 6 machines. 
C) 2 machines. 
D) 1 machine. 
E) 3 machines.

Question 5

At the beginning of the year, Tom's Tubes has capital of 5 tube- inflating machines.During the year, Tom scraps 2 old machines and purchases 3 new machines.Tom's gross investment for the year is

Accepted Answer

A) 1 machine. 
B) 3 machines. 
C) 2 machines. 
D) 8 machines. 
E) 6 machines. 
A) 1 machine. 
B) 3 machines. 
C) 2 machines. 
D) 8 machines. 
E) 6 machines.

Question 6

Which of the following will shift the supply of loanable funds curve leftward?

Accepted Answer

A) a decrease in disposable income 
B) a decrease in the real interest rate 
C) a decrease in real wealth 
D) a decrease in expected future income 
E) a decrease in default risk 
A) a decrease in disposable income 
B) a decrease in the real interest rate 
C) a decrease in real wealth 
D) a decrease in expected future income 
E) a decrease in default risk

Question 7

As a result of a recession, the default risk increases.How does this change affect the loanable funds market?

Accepted Answer

A) There is a rightward shift of the supply of loanable funds curve. 
B) There is a rightward shift of the demand for loanable funds curve. 
C) There is a movement up along the supply of loanable funds curve. 
D) There is a leftward shift of the supply of loanable funds curve. 
E) There is a movement down along the demand for loanable funds curve. 
A) There is a rightward shift of the supply of loanable funds curve. 
B) There is a rightward shift of the demand for loanable funds curve. 
C) There is a movement up along the supply of loanable funds curve. 
D) There is a leftward shift of the supply of loanable funds curve. 
E) There is a movement down along the demand for loanable funds curve.

Question 8

As the _______ interest rate increases, the quantity of loanable funds demanded _______.

Accepted Answer

A) nominal; increases 
B) nominal; decreases 
C) real; does not change 
D) real; decreases 
E) real; increases 
A) nominal; increases 
B) nominal; decreases 
C) real; does not change 
D) real; decreases 
E) real; increases

Question 9

This year Pizza House spent $1.3 billion on new capital in its stores.Depreciation during the year was $300 million.Pizza House's gross investment was _______ and its net investment was _______.

Accepted Answer

A) $1.0 billion; $1.3 billion 
B) $1.3 billion; $1.0 billion 
C) $1.3 billion; $1.6 billion 
D) $1.3 billion; $0.3 billion 
E) $1.0 billion; $0.7 billion 
A) $1.0 billion; $1.3 billion 
B) $1.3 billion; $1.0 billion 
C) $1.3 billion; $1.6 billion 
D) $1.3 billion; $0.3 billion 
E) $1.0 billion; $0.7 billion

Question 10

Choose the statement that is incorrect.

Accepted Answer

A) A bond that you buy for $50 and pays you $5 a year has an interest rate of 10 percent a year. 
B) Stocks, bonds, short- term securities, and loans are financial assets. 
C) If the asset price rises, other things remaining the same, the interest rate falls. 
D) The price of an asset is determined first, then the interest rate is determined. 
E) The interest rate on a financial asset is the interest received expressed as a percentage of the price of the asset. 
A) A bond that you buy for $50 and pays you $5 a year has an interest rate of 10 percent a year. 
B) Stocks, bonds, short- term securities, and loans are financial assets. 
C) If the asset price rises, other things remaining the same, the interest rate falls. 
D) The price of an asset is determined first, then the interest rate is determined. 
E) The interest rate on a financial asset is the interest received expressed as a percentage of the price of the asset.

Question 11

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 investment increases by $1.0 trillion at each real interest rate, what is the new equilibrium real interest rate?

Accepted Answer

A) 5 percent a year 
B) 7 percent a year 
C) 6.5 percent a year 
D) 6.0 percent a year 
E) There is no new equilibrium real interest rate. 
A) 5 percent a year 
B) 7 percent a year 
C) 6.5 percent a year 
D) 6.0 percent a year 
E) There is no new equilibrium real interest rate.

Question 12

Refer to the figure below to answer the following questions.
   Figure 7.2.5
-In Figure 7.2.5, the initial supply of loanable funds curve is SLF0 and the initial demand for loanable funds curve is DLF0.An increase in the expected profit

Accepted Answer

A) shifts the supply of loanable funds curve rightward to curve SLF1, and shifts the demand for loanable funds curve rightward to curve DLF1. 
B) has no effect on either the demand for loanable funds curve or the supply of loanable funds curve. 
C) increases the inflation rate. 
D) shifts the demand for loanable funds curve rightward to curve DLF1 and does not shift the supply of loanable funds curve. 
E) shifts the supply of loanable funds curve rightward to curve SLF1 and does not shift the demand for loanable funds curve. 
A) shifts the supply of loanable funds curve rightward to curve SLF1, and shifts the demand for loanable funds curve rightward to curve DLF1. 
B) has no effect on either the demand for loanable funds curve or the supply of loanable funds curve. 
C) increases the inflation rate. 
D) shifts the demand for loanable funds curve rightward to curve DLF1 and does not shift the supply of loanable funds curve. 
E) shifts the supply of loanable funds curve rightward to curve SLF1 and does not shift the demand for loanable funds curve.

Question 13

If net taxes exceed government expenditures, the government sector has a budget _______ and government saving is _______.

Accepted Answer

A) deficit; positive 
B) deficit; negative 
C) surplus; negative 
D) balance that is zero; zero 
E) surplus; positive 
A) deficit; positive 
B) deficit; negative 
C) surplus; negative 
D) balance that is zero; zero 
E) surplus; positive

Question 14

Which of the following explains why the demand for loanable funds is negatively related to the real interest rate?

Accepted Answer

A) Interest rate flexibility in financial markets assures an equilibrium in which saving equals investment. 
B) Consumers are willing to spend less so they save more at higher real interest rates. 
C) A lower real interest rate makes more investment projects profitable. 
D) All of the above are reasons why the demand for loanable funds is negatively related to the real interest rate. 
E) None of the above are reasons why the demand for loanable funds is negatively related to the real interest rate. 
A) Interest rate flexibility in financial markets assures an equilibrium in which saving equals investment. 
B) Consumers are willing to spend less so they save more at higher real interest rates. 
C) A lower real interest rate makes more investment projects profitable. 
D) All of the above are reasons why the demand for loanable funds is negatively related to the real interest rate. 
E) None of the above are reasons why the demand for loanable funds is negatively related to the real interest rate.

Question 15

The real interest rate

Accepted Answer

A) increases when the inflation rate increases. 
B) is approximately equal to the nominal interest rate plus the inflation rate. 
C) is approximately equal to the nominal interest rate minus the inflation rate. 
D) can never be negative. 
E) is determined in the market for money. 
A) increases when the inflation rate increases. 
B) is approximately equal to the nominal interest rate plus the inflation rate. 
C) is approximately equal to the nominal interest rate minus the inflation rate. 
D) can never be negative. 
E) is determined in the market for money.

Question 16

When the real interest rate increases,

Accepted Answer

A) the demand for loanable funds curve shifts leftward. 
B) the supply of loanable funds curve shifts rightward. 
C) there is a movement up along the supply of loanable funds curve. 
D) the supply of loanable funds curve shifts leftward. 
E) there is a movement down along the supply of loanable funds curve. 
A) the demand for loanable funds curve shifts leftward. 
B) the supply of loanable funds curve shifts rightward. 
C) there is a movement up along the supply of loanable funds curve. 
D) the supply of loanable funds curve shifts leftward. 
E) there is a movement down along the supply of loanable funds curve.

Question 17

If households believe they will experience higher income in the near future, there is a

Accepted Answer

A) rightward shift of the supply of loanable funds curve. 
B) rightward shift of the demand for loanable funds curve. 
C) movement up along the supply of loanable funds curve. 
D) leftward shift of the supply of loanable funds curve. 
E) movement down along the demand for loanable funds curve. 
A) rightward shift of the supply of loanable funds curve. 
B) rightward shift of the demand for loanable funds curve. 
C) movement up along the supply of loanable funds curve. 
D) leftward shift of the supply of loanable funds curve. 
E) movement down along the demand for loanable funds curve.

Question 18

If the real interest rate is below the equilibrium real interest rate,

Accepted Answer

A) a shortage of of loanable funds exists, and the real interest rate rises. 
B) lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve shifts rightward. 
C) borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve shifts rightward. 
D) borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve shifts leftward. 
E) lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve shifts leftward. 
A) a shortage of of loanable funds exists, and the real interest rate rises. 
B) lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve shifts rightward. 
C) borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve shifts rightward. 
D) borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve shifts leftward. 
E) lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve shifts leftward.

Question 19

A fall in the real interest rate

Accepted Answer

A) shifts the demand for loanable funds curve rightward. 
B) decreases the inflation rate. 
C) creates a movement down along the demand for loanable funds curve. 
D) creates a movement up along the demand for loanable funds curve. 
E) shifts the demand for loanable funds curve leftward. 
A) shifts the demand for loanable funds curve rightward. 
B) decreases the inflation rate. 
C) creates a movement down along the demand for loanable funds curve. 
D) creates a movement up along the demand for loanable funds curve. 
E) shifts the demand for loanable funds curve leftward.

Question 20

According to the Ricardo- Barro effect, government deficits

Accepted Answer

A) lead to a fall in the equilibrium real interest rate and an increase in investment. 
B) lead to simultaneous decreases in private saving and decreases in the equilibrium real interest rate and investment. 
C) lead to a rise in the equilibrium real interest rate, crowding out investment. 
D) raise the real interest rate but have no effect on the nominal interest rate. 
E) lead to simultaneous increases in private saving and have no effect on the equilibrium real interest rate and investment. 
A) lead to a fall in the equilibrium real interest rate and an increase in investment. 
B) lead to simultaneous decreases in private saving and decreases in the equilibrium real interest rate and investment. 
C) lead to a rise in the equilibrium real interest rate, crowding out investment. 
D) raise the real interest rate but have no effect on the nominal interest rate. 
E) lead to simultaneous increases in private saving and have no effect on the equilibrium real interest rate and investment.

As the _ interest rate rises _.

In 2017, Tim's Gyms finances the building of a new gym.Tim secures this financing from a bank, and the bank receives ownership if Tim fails to make payments.This source of funds is

If national saving equals $100,000, net taxes equal $100,000 and government expenditure equals $25,000, what is private saving?

At the beginning of the year, Tom's Tubes has capital of 5 tube- inflating machines.During the year, Tom scraps 2 old machines and purchases 3 new machines.Tom's capital at the end of year is

At the beginning of the year, Tom's Tubes has capital of 5 tube- inflating machines.During the year, Tom scraps 2 old machines and purchases 3 new machines.Tom's gross investment for the year is

Which of the following will shift the supply of loanable funds curve leftward?

As a result of a recession, the default risk increases.How does this change affect the loanable funds market?

As the _ interest rate increases, the quantity of loanable funds demanded _.

This year Pizza House spent $1.3 billion on new capital in its stores.Depreciation during the year was $300 million.Pizza House's gross investment was _ and its net investment was _.

Choose the statement that is incorrect.

Refer to the figure below to answer the following questions. Figure 7.2.5 -In Figure 7.2.5, the initial supply of loanable funds curve is SLF₀and the initial demand for loanable funds curve is DLF₀.An increase in the expected profit

If net taxes exceed government expenditures, the government sector has a budget _ and government saving is _.

Which of the following explains why the demand for loanable funds is negatively related to the real interest rate?

The real interest rate

When the real interest rate increases,

If households believe they will experience higher income in the near future, there is a

If the real interest rate is below the equilibrium real interest rate,

A fall in the real interest rate

According to the Ricardo- Barro effect, government deficits

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

As the _______ interest rate rises _______.

In 2017, Tim's Gyms finances the building of a new gym.Tim secures this financing from a bank, and the bank receives ownership if Tim fails to make payments.This source of funds is

If national saving equals $100,000, net taxes equal $100,000 and government expenditure equals $25,000, what is private saving?

At the beginning of the year, Tom's Tubes has capital of 5 tube- inflating machines.During the year, Tom scraps 2 old machines and purchases 3 new machines.Tom's capital at the end of year is

At the beginning of the year, Tom's Tubes has capital of 5 tube- inflating machines.During the year, Tom scraps 2 old machines and purchases 3 new machines.Tom's gross investment for the year is

Which of the following will shift the supply of loanable funds curve leftward?

As a result of a recession, the default risk increases.How does this change affect the loanable funds market?

As the _______ interest rate increases, the quantity of loanable funds demanded _______.

This year Pizza House spent $1.3 billion on new capital in its stores.Depreciation during the year was $300 million.Pizza House's gross investment was _______ and its net investment was _______.

Choose the statement that is incorrect.

Refer to the figure below to answer the following questions. Figure 7.2.5 -In Figure 7.2.5, the initial supply of loanable funds curve is SLF0 and the initial demand for loanable funds curve is DLF0.An increase in the expected profit

If net taxes exceed government expenditures, the government sector has a budget _______ and government saving is _______.

Which of the following explains why the demand for loanable funds is negatively related to the real interest rate?

The real interest rate

When the real interest rate increases,

If households believe they will experience higher income in the near future, there is a

If the real interest rate is below the equilibrium real interest rate,

A fall in the real interest rate

According to the Ricardo- Barro effect, government deficits

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

As the _ interest rate rises _.

As the _ interest rate increases, the quantity of loanable funds demanded _.

This year Pizza House spent $1.3 billion on new capital in its stores.Depreciation during the year was $300 million.Pizza House's gross investment was _ and its net investment was _.

Refer to the figure below to answer the following questions. Figure 7.2.5 -In Figure 7.2.5, the initial supply of loanable funds curve is SLF₀and the initial demand for loanable funds curve is DLF₀.An increase in the expected profit

If net taxes exceed government expenditures, the government sector has a budget _ and government saving is _.