Question 1

The quantity of loanable funds demanded increases when

Accepted Answer

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

Question 2

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

Accepted Answer

A) leftward and decreases the real interest rate. 
B) leftward and increases 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 decreases the real interest rate. 
B) leftward and increases 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 3

Table 23.3.4
  
-Refer to Table 23.3.4.The table shows an economy's demand for loanable funds schedule and the private supply of loanable funds schedule when the government's budget is balanced.If the government budget deficit is $1.0 trillion,the real interest rate is ________ percent a year,the quantity of investment is ________ trillion,and the quantity of private saving is ________ trillion.

Accepted Answer

A) 7;$5.5;$8.5 
B) 7;$8.5;$5.5 
C) 5;$6.5;$7.5 
D) 3;$6.5;$7.0 
E) 5;$7.5;$6.5 
A) 7;$5.5;$8.5 
B) 7;$8.5;$5.5 
C) 5;$6.5;$7.5 
D) 3;$6.5;$7.0 
E) 5;$7.5;$6.5

Question 4

A decrease in the government budget deficit decreases the ________ loanable funds and an increase in the government budget surplus increases the ________ loanable funds.

Accepted Answer

A) demand for;demand for 
B) demand for;supply of 
C) supply of;demand for 
D) supply of;supply of 
E) demand for loanable funds and the supply of;supply of loanable funds and the demand for 
A) demand for;demand for 
B) demand for;supply of 
C) supply of;demand for 
D) supply of;supply of 
E) demand for loanable funds and the supply of;supply of loanable funds and the demand for

Question 5

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

Question 6

A very small country is a net foreign borrower and its demand for loanable funds increases.As a result,the equilibrium quantity of loanable funds used in the country ________ and the country's foreign borrowing ________.

Accepted Answer

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

Question 7

Investment is financed by which of the following?
I.Government spending.
II.Household saving.
III.Borrowing from the rest of the world.

Accepted Answer

A) I, II, and III 
B) I and II only 
C) I and III only 
D) II and III only 
E) None of the above 
A) I, II, and III 
B) I and II only 
C) I and III only 
D) II and III only 
E) None of the above

Question 8

In January 2011,Tim's Gyms,Inc.owned machines valued at $1 million.During the year,the market value of the machines fell by 30 percent.During 2011,Tim spent $200,000 on new machines.During 2011,Tim's gross investment was

Accepted Answer

A) $1 million. 
B) $300,000. 
C) $200,000 
D) $900,000. 
E) $100,000. 
A) $1 million. 
B) $300,000. 
C) $200,000 
D) $900,000. 
E) $100,000.

Question 9

As the ________ rises,the quantity of loanable funds supplied ________ other things remaining the same.

Accepted Answer

A) nominal interest rate;increases 
B) real interest rate;increases 
C) inflation rate;increases 
D) real interest rate;decreases 
E) inflation rate;decreases 
A) nominal interest rate;increases 
B) real interest rate;increases 
C) inflation rate;increases 
D) real interest rate;decreases 
E) inflation rate;decreases

Question 10

At the beginning of the year,Tom's Tubes had a capital stock of 5 tube-inflating machines.During the year,Tom scrapped 2 old machines and purchased 3 new machines.Tom's net investment for the year totaled

Accepted Answer

A) 1 machine. 
B) 2 machines. 
C) 3 machines. 
D) 6 machines. 
E) 5 machines 
A) 1 machine. 
B) 2 machines. 
C) 3 machines. 
D) 6 machines. 
E) 5 machines

Question 11

In 2011,Tim's Gyms needs to finance the building of a new gym.Suppose Tim secures this financing from a bank,and the bank receives ownership if Tim fails to make payments.This type of funding is

Accepted Answer

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

Question 12

Suppose that a bond promises to pay its holder $100 a year forever.If the price of the bond increases from $1,000 to $1,250,then the interest rate on the bond ________.

Accepted Answer

A) rises from 8 percent a year to 10 percent a year 
B) falls from 10 percent a year to 6 percent a year 
C) falls from 10 percent a year to 8 percent a year 
D) rises because the bond becomes a better investment 
E) does not change because the purchaser buys the bond knowing that interest rates will be adjusted 
A) rises from 8 percent a year to 10 percent a year 
B) falls from 10 percent a year to 6 percent a year 
C) falls from 10 percent a year to 8 percent a year 
D) rises because the bond becomes a better investment 
E) does not change because the purchaser buys the bond knowing that interest rates will be adjusted

Question 13

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 II 
C) I and III 
D) I, II, and III 
E) None of the above 
A) I only 
B) I and II 
C) I and III 
D) I, II, and III 
E) None of the above

Question 14

If the economy's capital increases over time,

Accepted Answer

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

Question 15

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

Accepted Answer

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

Question 16

Refer to the figure below to answer the following questions.
   
Figure 23.2.2
-Refer to Figure 23.2.2.In Figure 23.2.2,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 economy's capital decreases over time,

Accepted Answer

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

Question 18

An increase in the government budget deficit ________.If the country is an international borrower,the government budget deficit ________.If the country is an international lender,the government budget deficit ________.

Accepted Answer

A) increases the country's supply of loanable funds;decreases foreign lending;increases foreign borrowing 
B) decreases the country's demand for loanable funds;decreases foreign lending;increases foreign borrowing 
C) increases the country's demand for loanable funds;increases foreign borrowing;decreases foreign lending 
D) decreases the country's supply of loanable funds;increases foreign borrowing;decreases foreign lending 
E) increases the country's demand for loanable funds;decreases foreign borrowing;increases foreign lending 
A) increases the country's supply of loanable funds;decreases foreign lending;increases foreign borrowing 
B) decreases the country's demand for loanable funds;decreases foreign lending;increases foreign borrowing 
C) increases the country's demand for loanable funds;increases foreign borrowing;decreases foreign lending 
D) decreases the country's supply of loanable funds;increases foreign borrowing;decreases foreign lending 
E) increases the country's demand for loanable funds;decreases foreign borrowing;increases foreign lending

Question 19

The supply of loanable funds is the relationship between the quantity loanable funds supplied and ________ other things remaining the same.

Accepted Answer

A) real GDP 
B) the price level 
C) the real interest rate 
D) the inflation rate 
E) the nominal interest rate 
A) real GDP 
B) the price level 
C) the real interest rate 
D) the inflation rate 
E) the nominal interest rate

Question 20

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

Accepted Answer

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

Exam 23: Finance, Saving, and Investment

The quantity of loanable funds demanded increases when

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

A decrease in the government budget deficit decreases the ________ loanable funds and an increase in the government budget surplus increases the ________ loanable funds.

The equilibrium real interest rate is determined by the

A very small country is a net foreign borrower and its demand for loanable funds increases.As a result,the equilibrium quantity of loanable funds used in the country ________ and the country's foreign borrowing ________.

Investment is financed by which of the following? I.Government spending. II.Household saving. III.Borrowing from the rest of the world.

In January 2011,Tim's Gyms,Inc.owned machines valued at $1 million.During the year,the market value of the machines fell by 30 percent.During 2011,Tim spent $200,000 on new machines.During 2011,Tim's gross investment was

As the ________ rises,the quantity of loanable funds supplied ________ other things remaining the same.

At the beginning of the year,Tom's Tubes had a capital stock of 5 tube-inflating machines.During the year,Tom scrapped 2 old machines and purchased 3 new machines.Tom's net investment for the year totaled

In 2011,Tim's Gyms needs to finance the building of a new gym.Suppose Tim secures this financing from a bank,and the bank receives ownership if Tim fails to make payments.This type of funding is

Suppose that a bond promises to pay its holder $100 a year forever.If the price of the bond increases from $1,000 to $1,250,then the interest rate on the bond ________.

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

If the economy's capital increases over time,

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

Refer to the figure below to answer the following questions. Figure 23.2.2 -Refer to Figure 23.2.2.In Figure 23.2.2,an increase in expected profit will result in a movement from point E to

If the economy's capital decreases over time,

An increase in the government budget deficit ________.If the country is an international borrower,the government budget deficit ________.If the country is an international lender,the government budget deficit ________.

The supply of loanable funds is the relationship between the quantity loanable funds supplied and ________ other things remaining the same.

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

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

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Possibilities, Preferences, and Choices

Organizing Production

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Perfect Competition

Monopoly

Monopolistic Competition

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Markets for Factors of Production

Economic Inequality

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Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

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A decrease in the government budget deficit decreases the loanable funds and an increase in the government budget surplus increases the loanable funds.

A very small country is a net foreign borrower and its demand for loanable funds increases.As a result,the equilibrium quantity of loanable funds used in the country and the country's foreign borrowing .

As the rises,the quantity of loanable funds supplied other things remaining the same.

An increase in the government budget deficit .If the country is an international borrower,the government budget deficit .If the country is an international lender,the government budget deficit .