Question 1

The share of total income for "capitalists" in America (in the form of rent, interest, and profits) has been about

Accepted Answer

A) 20 percent. 
B) 40 percent. 
C) 50 percent. 
D) 75 percent. 
A) 20 percent. 
B) 40 percent. 
C) 50 percent. 
D) 75 percent.

Question 2

Demand is the active and supply the passive determinant of land rent.

Accepted Answer

A) True 
 B)False

Question 3

The aggregate economic rent received by a productive resource will decrease, ceteris paribus, whenever the

Accepted Answer

A) demand for the resource increases. 
B) price of the resource decreases. 
C) demand for the resource decreases. 
D) supply curve shifts to the right. 
A) demand for the resource increases. 
B) price of the resource decreases. 
C) demand for the resource decreases. 
D) supply curve shifts to the right.

Question 4

In year 1 the price level is constant and the nominal rate of interest is 6 percent.But in year 2 the inflation rate is 3 percent.If the real rate of interest is to remain at the same level in year 2 as it was in year 1, then in year 2 the nominal interest rate must

Accepted Answer

A) rise by 9 percentage points. 
B) rise by 3 percentage points. 
C) fall by 3 percentage points. 
D) rise by 6 percentage points. 
A) rise by 9 percentage points. 
B) rise by 3 percentage points. 
C) fall by 3 percentage points. 
D) rise by 6 percentage points.

Question 5

Interest rates are the payments needed to entice individuals to

Accepted Answer

A) accept insurable risk. 
B) accept uninsurable risk. 
C) sacrifice their present consumption. 
D) sacrifice their future consumption. 
A) accept insurable risk. 
B) accept uninsurable risk. 
C) sacrifice their present consumption. 
D) sacrifice their future consumption.

Question 6

The real interest rate can be estimated by

Accepted Answer

A) subtracting the pure interest rate from the nominal interest rate. 
B) dividing the nominal interest rate by the consumer price index. 
C) subtracting the nominal interest rate from the rate of inflation. 
D) subtracting the rate of inflation from the nominal interest rate. 
A) subtracting the pure interest rate from the nominal interest rate. 
B) dividing the nominal interest rate by the consumer price index. 
C) subtracting the nominal interest rate from the rate of inflation. 
D) subtracting the rate of inflation from the nominal interest rate.

Question 7

The economist who advocated a single tax on land was

Accepted Answer

A) Adam Smith. 
B) John Maynard Keynes. 
C) Henry George. 
D) Milton Friedman. 
A) Adam Smith. 
B) John Maynard Keynes. 
C) Henry George. 
D) Milton Friedman.

Question 8

Economic profits

Accepted Answer

A) are identical to accounting profits. 
B) must be earned by every firm that continues to produce in the long run. 
C) serve no useful economic purpose and should never occur in a competitive economy. 
D) serve in the short run as an incentive to guide production decisions, but indicate the existence of barriers to entry in the long run. 
A) are identical to accounting profits. 
B) must be earned by every firm that continues to produce in the long run. 
C) serve no useful economic purpose and should never occur in a competitive economy. 
D) serve in the short run as an incentive to guide production decisions, but indicate the existence of barriers to entry in the long run.

Question 9

Entrepreneurs mostly focus on a single number: profits.As a result, which of the following statements tends to be true about their firms?

Accepted Answer

A) The firms tend to do well in some aspects of their operations, but other aspects are neglected. 
B) The firms cannot achieve a very high overall efficiency. 
C) The firms pay close attention to every aspect of their operations. 
D) The firms' suppliers and customers are often left behind. 
A) The firms tend to do well in some aspects of their operations, but other aspects are neglected. 
B) The firms cannot achieve a very high overall efficiency. 
C) The firms pay close attention to every aspect of their operations. 
D) The firms' suppliers and customers are often left behind.

Question 10

A decrease in the supply of loanable funds and an increase in the demand for loanable funds will

Accepted Answer

A) increase the interest rate and the quantity of funds loaned. 
B) decrease the interest rate and the quantity of funds loaned. 
C) increase the interest rate, but the quantity of funds loaned may either increase or decrease. 
D) decrease the interest rate, but the quantity of funds loaned may either increase or decrease. 
A) increase the interest rate and the quantity of funds loaned. 
B) decrease the interest rate and the quantity of funds loaned. 
C) increase the interest rate, but the quantity of funds loaned may either increase or decrease. 
D) decrease the interest rate, but the quantity of funds loaned may either increase or decrease.

Question 11

"Pure rate of interest" refers to the interest rate that

Accepted Answer

A) borrowers pay to lenders in their own family or circle of close friends. 
B) serves solely as payment to lenders for giving up current use of their funds. 
C) is the difference between the actual rate and the theoretical rate. 
D) measures the compensation to lenders for taking on the risks involved. 
A) borrowers pay to lenders in their own family or circle of close friends. 
B) serves solely as payment to lenders for giving up current use of their funds. 
C) is the difference between the actual rate and the theoretical rate. 
D) measures the compensation to lenders for taking on the risks involved.

Question 12

Which of the following is a source of insurable business risk?

Accepted Answer

A) changes in consumer tastes 
B) changes in government policies 
C) economic recession 
D) accidents to employees 
A) changes in consumer tastes 
B) changes in government policies 
C) economic recession 
D) accidents to employees

Question 13

Which of the following resources is a "free and nonreproducible gift of nature"?

Accepted Answer

A) labor 
B) entrepreneurship 
C) capital 
D) land 
A) labor 
B) entrepreneurship 
C) capital 
D) land

Question 14

Which of the following generalizations is false? Other things equal,

Accepted Answer

A) interest rates are higher if lenders are imperfectly, rather than purely, competitive. 
B) the interest rate is less on small loans than on larger loans. 
C) long-term loans normally command higher interest rates than short-term loans. 
D) the greater the risk on a loan, the greater the interest rate. 
A) interest rates are higher if lenders are imperfectly, rather than purely, competitive. 
B) the interest rate is less on small loans than on larger loans. 
C) long-term loans normally command higher interest rates than short-term loans. 
D) the greater the risk on a loan, the greater the interest rate.

Question 15

The future value of $3,000 deposited today at 5 percent interest is $3,646.52 four years from now.

Accepted Answer

A) True 
 B)False

Question 16

Money is an economic resource referred to as capital.

Accepted Answer

A) True 
 B)False

Question 17

Usury laws

Accepted Answer

A) allocate funds from low-productivity to high-productivity investments. 
B) establish a legal ceiling on interest rates. 
C) make more funds available to low-income borrowers. 
D) create a surplus of loanable funds. 
A) allocate funds from low-productivity to high-productivity investments. 
B) establish a legal ceiling on interest rates. 
C) make more funds available to low-income borrowers. 
D) create a surplus of loanable funds.

Question 18

Which of the following statements is correct?

Accepted Answer

A) Economic profits can properly be regarded as the salaries received by the hired managers of corporations. 
B) Economic rent is a price paid for productive land resources whose supply is perfectly inelastic. 
C) Economic profits would be nonexistent in a dynamic, purely competitive economy. 
D) Economic, or pure, profit is the minimum return that entrepreneurs must receive to continue in a particular line of production. 
A) Economic profits can properly be regarded as the salaries received by the hired managers of corporations. 
B) Economic rent is a price paid for productive land resources whose supply is perfectly inelastic. 
C) Economic profits would be nonexistent in a dynamic, purely competitive economy. 
D) Economic, or pure, profit is the minimum return that entrepreneurs must receive to continue in a particular line of production.

Question 19

A usury law is a law that sets the

Accepted Answer

A) federal funds rate. 
B) maximum interest rate at which loans can be made. 
C) spread between the prime rate of interest and credit card rates. 
D) interest paid on 90-day Treasury bills and 30-year bonds of the U.S.government. 
A) federal funds rate. 
B) maximum interest rate at which loans can be made. 
C) spread between the prime rate of interest and credit card rates. 
D) interest paid on 90-day Treasury bills and 30-year bonds of the U.S.government.

Question 20

Which of the following statements about interest rates is false?

Accepted Answer

A) Interest rates typically reflect the risk involved in extending a loan. 
B) Interest rates are affected by households' spending decisions. 
C) The equilibrium interest rate is determined by the intersection of the supply and demand schedules for loanable funds. 
D) The supply of loanable funds is independent of the rate of interest. 
A) Interest rates typically reflect the risk involved in extending a loan. 
B) Interest rates are affected by households' spending decisions. 
C) The equilibrium interest rate is determined by the intersection of the supply and demand schedules for loanable funds. 
D) The supply of loanable funds is independent of the rate of interest.

Exam 18: Rent, Interest, and Profit

The share of total income for "capitalists" in America (in the form of rent, interest, and profits) has been about

Demand is the active and supply the passive determinant of land rent.

The aggregate economic rent received by a productive resource will decrease, ceteris paribus, whenever the

In year 1 the price level is constant and the nominal rate of interest is 6 percent.But in year 2 the inflation rate is 3 percent.If the real rate of interest is to remain at the same level in year 2 as it was in year 1, then in year 2 the nominal interest rate must

Interest rates are the payments needed to entice individuals to

The real interest rate can be estimated by

The economist who advocated a single tax on land was

Economic profits

Entrepreneurs mostly focus on a single number: profits.As a result, which of the following statements tends to be true about their firms?

A decrease in the supply of loanable funds and an increase in the demand for loanable funds will

"Pure rate of interest" refers to the interest rate that

Which of the following is a source of insurable business risk?

Which of the following resources is a "free and nonreproducible gift of nature"?

Which of the following generalizations is false? Other things equal,

The future value of $3,000 deposited today at 5 percent interest is $3,646.52 four years from now.

Money is an economic resource referred to as capital.

Usury laws

Which of the following statements is correct?

A usury law is a law that sets the

Which of the following statements about interest rates is false?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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