Question 1

An increase in disposable income shifts the supply of loanable funds curve

Accepted Answer

A) leftward and increases the real interest rate. 
B) leftward and decreases the real interest rate. 
C) rightward and decreases the real interest rate. 
D) rightward and increases the real interest rate. 
E) rightward and the demand for loanable funds curve leftward. 
A) leftward and increases the real interest rate. 
B) leftward and decreases the real interest rate. 
C) rightward and decreases the real interest rate. 
D) rightward and increases the real interest rate. 
E) rightward and the demand for loanable funds curve leftward.

Question 2

Use the table below to answer the following question.
Table 7.3.1  
-Table 7.3.1 shows the market for loanable funds in Northland.The government budget is balanced.If the government moves from a balanced budget to a surplus of $20 billion, the new equilibrium occurs at a real interest rate of _______ percent and the equilibrium quantity of loanable funds is _______.

Accepted Answer

A) 5.5; $90 billion 
B) 5.5; $110 billion 
C) 6.5; $90 billion 
D) 6; $120 billion 
E) 6.5; $110 billion 
A) 5.5; $90 billion 
B) 5.5; $110 billion 
C) 6.5; $90 billion 
D) 6; $120 billion 
E) 6.5; $110 billion

Question 3

The quantity of loanable funds demanded increases when

Accepted Answer

A) the supply of loanable funds decreases. 
B) the real interest rate rises. 
C) expected profit decreases. 
D) wealth increases. 
E) the real interest rate falls. 
A) the supply of loanable funds decreases. 
B) the real interest rate rises. 
C) expected profit decreases. 
D) wealth increases. 
E) the real interest rate falls.

Question 4

National saving equals

Accepted Answer

A) private saving - net taxes. 
B) government saving. 
C) private saving + private wealth. 
D) investment. 
E) private saving + government saving. 
A) private saving - net taxes. 
B) government saving. 
C) private saving + private wealth. 
D) investment. 
E) private saving + government saving.

Question 5

If the economy's capital increases over time,

Accepted Answer

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

Question 6

In the market for loanable funds, a larger government surplus leads to

Accepted Answer

A) a lower real interest rate, and decreased investment. 
B) a higher real interest rate, and decreased investment. 
C) no effect on the real interest rate or investment. 
D) a lower real interest rate, and increased investment. 
E) a higher real interest rate, and increased investment. 
A) a lower real interest rate, and decreased investment. 
B) a higher real interest rate, and decreased investment. 
C) no effect on the real interest rate or investment. 
D) a lower real interest rate, and increased investment. 
E) a higher real interest rate, and increased investment.

Question 7

If a bank's net worth is negative, then the bank is

Accepted Answer

A) liquid. 
B) solvent. 
C) illiquid. 
D) insolvent. 
E) destitute. 
A) liquid. 
B) solvent. 
C) illiquid. 
D) insolvent. 
E) destitute.

Question 8

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, then

Accepted Answer

A) the supply of loanable funds increases. 
B) people will save more. 
C) the real interest rate will fall. 
D) the real interest rate will rise. 
E) the demand for loanable funds increases. 
A) the supply of loanable funds increases. 
B) people will save more. 
C) the real interest rate will fall. 
D) the real interest rate will rise. 
E) the demand for loanable funds increases.

Question 9

If households' disposable income decreases, then

Accepted Answer

A) the supply of loanable funds increases. 
B) the demand for loanable funds decreases. 
C) households' saving decreases. 
D) a movement occurs down along the supply of loanable funds curve. 
E) households' saving increases. 
A) the supply of loanable funds increases. 
B) the demand for loanable funds decreases. 
C) households' saving decreases. 
D) a movement occurs down along the supply of loanable funds curve. 
E) households' saving increases.

Question 10

Changes in all of the following shift the supply curve of loanable funds except

Accepted Answer

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

Question 11

Choose the statement that is incorrect.

Accepted Answer

A) A financial institution's net worth is the market value of what it has lent minus the market value of what it has borrowed. 
B) Insolvency and illiquidity were at the core of a global financial meltdown in 2007- 2008. 
C) A financial institution can be solvent but illiquid. 
D) If a financial institution's net worth is negative, the institution is solvent. 
E) A firm is illiquid if it has made long- term loans with borrowed funds and is faced with a sudden demand to repay more of what is has borrowed than its available cash. 
A) A financial institution's net worth is the market value of what it has lent minus the market value of what it has borrowed. 
B) Insolvency and illiquidity were at the core of a global financial meltdown in 2007- 2008. 
C) A financial institution can be solvent but illiquid. 
D) If a financial institution's net worth is negative, the institution is solvent. 
E) A firm is illiquid if it has made long- term loans with borrowed funds and is faced with a sudden demand to repay more of what is has borrowed than its available cash.

Question 12

The demand for loanable funds curve

Accepted Answer

A) is vertical. 
B) is horizontal. 
C) has a positive slope. 
D) slopes downward at high real interest rates and slopes upward at low real interest rates. 
E) has a negative slope. 
A) is vertical. 
B) is horizontal. 
C) has a positive slope. 
D) slopes downward at high real interest rates and slopes upward at low real interest rates. 
E) has a negative slope.

Question 13

When the inflation rate is zero, the

Accepted Answer

A) real interest rate is negative. 
B) nominal interest rate is zero. 
C) demand for loanable funds increases. 
D) supply of loanable funds decreases. 
E) real interest rate equals the nominal interest rate. 
A) real interest rate is negative. 
B) nominal interest rate is zero. 
C) demand for loanable funds increases. 
D) supply of loanable funds decreases. 
E) real interest rate equals the nominal interest rate.

Question 14

A rise in the real interest rate

Accepted Answer

A) shifts the demand for loanable funds curve rightward. 
B) shifts the demand for loanable funds curve leftward. 
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) increases the inflation rate. 
A) shifts the demand for loanable funds curve rightward. 
B) shifts the demand for loanable funds curve leftward. 
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) increases the inflation rate.

Question 15

The funds used to buy physical capital are

Accepted Answer

A) net investment. 
B) investment. 
C) wealth. 
D) financial capital. 
E) saving. 
A) net investment. 
B) investment. 
C) wealth. 
D) financial capital. 
E) saving.

Question 16

Refer to the figure below to answer the following questions.
   Figure 7.2.2
-In Figure 7.2.2, an increase in expected profit will result in a movement from point E to

Accepted Answer

A) point F. 
B) point G. 
C) point H. 
D) point I. 
E) either point I or point F. 
A) point F. 
B) point G. 
C) point H. 
D) point I. 
E) either point I or point F.

Question 17

If the real interest rate rises from 3 percent a year to 5 percent a year,

Accepted Answer

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

Question 18

The equilibrium real interest rate is determined by the

Accepted Answer

A) demand for loanable funds curve and the supply of loanable funds curve. 
B) supply of loanable funds curve and financial institutions. 
C) banks and insurance companies. 
D) demand for loanable funds curve and real GDP. 
E) government expenditure curve and the taxation curve. 
A) demand for loanable funds curve and the supply of loanable funds curve. 
B) supply of loanable funds curve and financial institutions. 
C) banks and insurance companies. 
D) demand for loanable funds curve and real GDP. 
E) government expenditure curve and the taxation curve.

Question 19

Investment will be higher if

Accepted Answer

A) the government deficit is higher. 
B) national saving is higher. 
C) net exports are higher. 
D) government spending is higher. 
E) the real interest rate is higher. 
A) the government deficit is higher. 
B) national saving is higher. 
C) net exports are higher. 
D) government spending is higher. 
E) the real interest rate is higher.

Question 20

Elena owns a bond with a price of $5,000, which pays $500 per year.The price of the bond rises in the bond market to $7,500.What is the new interest rate on the bond?

Accepted Answer

A) 500 percent 
B) 10 percent 
C) 5 percent 
D) 6.67 percent 
E) 20 percent 
A) 500 percent 
B) 10 percent 
C) 5 percent 
D) 6.67 percent 
E) 20 percent

An increase in disposable income shifts the supply of loanable funds curve

The quantity of loanable funds demanded increases when

National saving equals

If the economy's capital increases over time,

In the market for loanable funds, a larger government surplus leads to

If a bank's net worth is negative, then the bank is

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, then

If households' disposable income decreases, then

Changes in all of the following shift the supply curve of loanable funds except

Choose the statement that is incorrect.

The demand for loanable funds curve

When the inflation rate is zero, the

A rise in the real interest rate

The funds used to buy physical capital are

Refer to the figure below to answer the following questions. Figure 7.2.2 -In Figure 7.2.2, an increase in expected profit will result in a movement from point E to

If the real interest rate rises from 3 percent a year to 5 percent a year,

The equilibrium real interest rate is determined by the

Investment will be higher if

Elena owns a bond with a price of $5,000, which pays $500 per year.The price of the bond rises in the bond market to $7,500.What is the new interest rate on the bond?

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

An increase in disposable income shifts the supply of loanable funds curve

The quantity of loanable funds demanded increases when

National saving equals

If the economy's capital increases over time,

In the market for loanable funds, a larger government surplus leads to

If a bank's net worth is negative, then the bank is

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, then

If households' disposable income decreases, then

Changes in all of the following shift the supply curve of loanable funds except

Choose the statement that is incorrect.

The demand for loanable funds curve

When the inflation rate is zero, the

A rise in the real interest rate

The funds used to buy physical capital are

Refer to the figure below to answer the following questions. Figure 7.2.2 -In Figure 7.2.2, an increase in expected profit will result in a movement from point E to

If the real interest rate rises from 3 percent a year to 5 percent a year,

The equilibrium real interest rate is determined by the

Investment will be higher if

Elena owns a bond with a price of $5,000, which pays $500 per year.The price of the bond rises in the bond market to $7,500.What is the new interest rate on the bond?

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