Question 1

A business will want a loan when:

Accepted Answer

A)  interest rate  (cost of project - interest rate) / interest rate * 100. 
A)  interest rate  (cost of project - interest rate) / interest rate * 100.

Question 2

Banks are financial intermediaries that:

Accepted Answer

A)  have customer deposits as the primary asset and loans to borrowers as the primary liability. 
B)  provide liquid assets to lenders and long-term financing to borrowers. 
C)  are types of mutual funds. 
D)  have customer deposits as the primary asset and that provide liquid assets to lenders. 
A)  have customer deposits as the primary asset and loans to borrowers as the primary liability. 
B)  provide liquid assets to lenders and long-term financing to borrowers. 
C)  are types of mutual funds. 
D)  have customer deposits as the primary asset and that provide liquid assets to lenders.

Question 3

A person who is risk averse loses less welfare from losing $100 than he or she gains in welfare from winning $100.

Accepted Answer

A) True 
 B)False

Question 4

Lower interest rates will lead to less investment spending.

Accepted Answer

A) True 
 B)False

Question 5

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return of the project is:

Accepted Answer

A)  4.8%. 
B)  5%. 
C)  $5,000. 
D)  $105,000. 
A)  4.8%. 
B)  5%. 
C)  $5,000. 
D)  $105,000.

Question 6

You have purchased a new mattress for $2,000, and the store has given you a "12 months, same as cash" deal. This means that you do not actually have to pay for the mattress for another year. One year from now, you will have to give the store the full price of $2,000. If the annual interest rate is 10%, how much money do you need today to ensure that you will have $2,000 one year from today?

Accepted Answer

A)  $1,980 
B)  $1,818 
C)  $2,200 
D)  $20,000 
A)  $1,980 
B)  $1,818 
C)  $2,200 
D)  $20,000

Question 7

Use the following to answer questions:  
-(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. If the interest rate is lower than 8%, the quantity supplied of loanable funds will be _____ the quantity of loanable funds demanded.

Accepted Answer

A)  greater than 
B)  less than 
C)  equal to 
D)  The quantity supplied of loanable funds cannot be determined from the information provided. 
A)  greater than 
B)  less than 
C)  equal to 
D)  The quantity supplied of loanable funds cannot be determined from the information provided.

Question 8

Use the following to answer questions:  
-(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. Other things being equal, an increase in taxes on savings and investment income will shift _____ to the _____ and _____ the interest rate.

Accepted Answer

A)  demand; right; increase 
B)  demand; left; decrease 
C)  supply; right; decrease 
D)  supply; left; increase 
A)  demand; right; increase 
B)  demand; left; decrease 
C)  supply; right; decrease 
D)  supply; left; increase

Question 9

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is national saving?

Accepted Answer

A)  $3.5 trillion 
B)  $3 trillion 
C)  $2.5 trillion 
D)  $2 trillion 
A)  $3.5 trillion 
B)  $3 trillion 
C)  $2.5 trillion 
D)  $2 trillion

Question 10

An illiquid asset can be quickly converted to cash with little or no loss of value.

Accepted Answer

A) True 
 B)False

Question 11

Stocks are usually riskier than bonds but also typically earn a higher rate of return than do bonds.

Accepted Answer

A) True 
 B)False

Question 12

Usually the rate of return on stock is lower than the rate of return on bonds.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions:  
-(Figure: Crowding Out) Use Figure: Crowding Out. The supply of loanable funds curve SLF1 shifts to SLF2. This shift implies that:

Accepted Answer

A)  private savings has increased. 
B)  national investment has decreased. 
C)  private savings has decreased. 
D)  national savings has decreased. 
A)  private savings has increased. 
B)  national investment has decreased. 
C)  private savings has decreased. 
D)  national savings has decreased.

Question 14

A business will be likely to borrow to fund projects if the:

Accepted Answer

A)  rate of return on the project is less than the interest rate on the loan. 
B)  project will produce a good or service that is in high demand. 
C)  rate of return on the project is at least as high as the interest rate on the loan. 
D)  minimum efficient scale will be attained. 
A)  rate of return on the project is less than the interest rate on the loan. 
B)  project will produce a good or service that is in high demand. 
C)  rate of return on the project is at least as high as the interest rate on the loan. 
D)  minimum efficient scale will be attained.

Question 15

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is investment spending?

Accepted Answer

A)  $2 trillion 
B)  $3 trillion 
C)  $3.5 trillion 
D)  $4 trillion 
A)  $2 trillion 
B)  $3 trillion 
C)  $3.5 trillion 
D)  $4 trillion

Question 16

Economists view _____ as investment spending.

Accepted Answer

A)  stocks 
B)  bonds 
C)  spending on physical capital 
D)  mutual fund investing 
A)  stocks 
B)  bonds 
C)  spending on physical capital 
D)  mutual fund investing

Question 17

An asset that can be quickly converted to cash with relatively little loss of value is:

Accepted Answer

A)  illiquid. 
B)  liquid. 
C)  diversified. 
D)  risk averse. 
A)  illiquid. 
B)  liquid. 
C)  diversified. 
D)  risk averse.

Question 18

Banks are nonprofit financial intermediaries that collect the savings of their members and invest those funds in a diversified portfolio of assets to provide income to members when they retire.

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer question 93:  
-(Figure: Supply of Loanable Funds) Use Figure: Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the:

Accepted Answer

A)  supply of loanable funds rises by $20 billion. 
B)  quantity supplied of loanable funds rises by $20 billion. 
C)  supply of loanable funds falls by $10 billion. 
D)  quantity supplied of loanable funds falls by $20 billion. 
A)  supply of loanable funds rises by $20 billion. 
B)  quantity supplied of loanable funds rises by $20 billion. 
C)  supply of loanable funds falls by $10 billion. 
D)  quantity supplied of loanable funds falls by $20 billion.

Question 20

In a closed economy, all investment spending must come from:

Accepted Answer

A)  government. 
B)  national savings. 
C)  foreign savings. 
D)  government, domestic savings, and foreign savings. 
A)  government. 
B)  national savings. 
C)  foreign savings. 
D)  government, domestic savings, and foreign savings.

A business will want a loan when:

Banks are financial intermediaries that:

A person who is risk averse loses less welfare from losing $100 than he or she gains in welfare from winning $100.

Lower interest rates will lead to less investment spending.

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return of the project is:

Use the following to answer questions: -(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. If the interest rate is lower than 8%, the quantity supplied of loanable funds will be _____ the quantity of loanable funds demanded.

Use the following to answer questions: -(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. Other things being equal, an increase in taxes on savings and investment income will shift ___ to the _ and ___ the interest rate.

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is national saving?

An illiquid asset can be quickly converted to cash with little or no loss of value.

Stocks are usually riskier than bonds but also typically earn a higher rate of return than do bonds.

Usually the rate of return on stock is lower than the rate of return on bonds.

Use the following to answer questions: -(Figure: Crowding Out) Use Figure: Crowding Out. The supply of loanable funds curve S_LF₁ shifts to S_LF₂. This shift implies that:

A business will be likely to borrow to fund projects if the:

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is investment spending?

Economists view _____ as investment spending.

An asset that can be quickly converted to cash with relatively little loss of value is:

Banks are nonprofit financial intermediaries that collect the savings of their members and invest those funds in a diversified portfolio of assets to provide income to members when they retire.

Use the following to answer question 93: -(Figure: Supply of Loanable Funds) Use Figure: Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the:

In a closed economy, all investment spending must come from:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 10: Savings, Investment Spending, and the Financial Syst

A business will want a loan when:

Banks are financial intermediaries that:

A person who is risk averse loses less welfare from losing $100 than he or she gains in welfare from winning $100.

Lower interest rates will lead to less investment spending.

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return of the project is:

Use the following to answer questions: -(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. If the interest rate is lower than 8%, the quantity supplied of loanable funds will be _____ the quantity of loanable funds demanded.

Use the following to answer questions: -(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. Other things being equal, an increase in taxes on savings and investment income will shift _____ to the _____ and _____ the interest rate.

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is national saving?

An illiquid asset can be quickly converted to cash with little or no loss of value.

Stocks are usually riskier than bonds but also typically earn a higher rate of return than do bonds.

Usually the rate of return on stock is lower than the rate of return on bonds.

Use the following to answer questions: -(Figure: Crowding Out) Use Figure: Crowding Out. The supply of loanable funds curve SLF1 shifts to SLF2. This shift implies that:

A business will be likely to borrow to fund projects if the:

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is investment spending?

Economists view _____ as investment spending.

An asset that can be quickly converted to cash with relatively little loss of value is:

Banks are nonprofit financial intermediaries that collect the savings of their members and invest those funds in a diversified portfolio of assets to provide income to members when they retire.

Use the following to answer question 93: -(Figure: Supply of Loanable Funds) Use Figure: Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the:

In a closed economy, all investment spending must come from:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Use the following to answer questions: -(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. Other things being equal, an increase in taxes on savings and investment income will shift ___ to the _ and ___ the interest rate.

Use the following to answer questions: -(Figure: Crowding Out) Use Figure: Crowding Out. The supply of loanable funds curve S_LF₁ shifts to S_LF₂. This shift implies that: