Question 1

Which factor will increase the demand for loanable funds?

Accepted Answer

A) a change in the tax law to exempt savings from taxation 
B) expansion of social insurance to cover more fully the cost of retirement 
C) a general business recession that produces high rates of unemployment 
D) a technological advance that increases returns on investments 
A) a change in the tax law to exempt savings from taxation 
B) expansion of social insurance to cover more fully the cost of retirement 
C) a general business recession that produces high rates of unemployment 
D) a technological advance that increases returns on investments

Question 2

The rent paid for the pasture land used to graze cattle would increase if

Accepted Answer

A) the productivity of the land increased. 
B) people decided to consume more beef. 
C) oil deposits were discovered on the land. 
D) any of these occurred. 
A) the productivity of the land increased. 
B) people decided to consume more beef. 
C) oil deposits were discovered on the land. 
D) any of these occurred.

Question 3

In time-value of money calculations, discounting is the reverse of compounding.

Accepted Answer

A) True 
 B)False

Question 4

Currently, capitalist income, that is, corporate profits, interest, and rent, accounts for about what percentage of the income paid to American resource suppliers?

Accepted Answer

A) 10 percent 
B) 20 percent 
C) 50 percent 
D) 80 percent 
A) 10 percent 
B) 20 percent 
C) 50 percent 
D) 80 percent

Question 5

(Last Word) Suppose you deposit $5,000 in a bank that pays 10 percent interest compounded twice a year.The actual annual interest rate you receive is

Accepted Answer

A) 10 percent. 
B) 11 percent. 
C) 10.25 percent. 
D) 12 percent. 
A) 10 percent. 
B) 11 percent. 
C) 10.25 percent. 
D) 12 percent.

Question 6

The demand side, not supply, is the major factor determining how high land's rent will be.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements about economic profits is not correct?

Accepted Answer

A) Economic profits act as a signal to producers who make decisions about how to allocate scarce resources. 
B) Economic profits are influenced by the degree of monopoly power. 
C) Economic profits represent a reward for risk taking. 
D) Economic profits are an explicit cost of production. 
A) Economic profits act as a signal to producers who make decisions about how to allocate scarce resources. 
B) Economic profits are influenced by the degree of monopoly power. 
C) Economic profits represent a reward for risk taking. 
D) Economic profits are an explicit cost of production.

Question 8

Economists who have studied the composition of "proprietor's income" have found that this income item is made up of

Accepted Answer

A) wages and profits, mostly wages. 
B) interest and profits, mostly profits. 
C) rent and interest, mostly interest. 
D) wages and interest, mostly wages. 
A) wages and profits, mostly wages. 
B) interest and profits, mostly profits. 
C) rent and interest, mostly interest. 
D) wages and interest, mostly wages.

Question 9

In his book Progress and Poverty, Henry George argued that

Accepted Answer

A) poverty is associated with the personal characteristics of individuals and therefore cannot be remedied by government antipoverty programs. 
B) economic rent could be heavily taxed without impairing the supply of land or, therefore, the productive capacity of the economy. 
C) rents should not be taxed, because rental income is the basic source of saving, which ultimately permits a high level of investment and economic growth. 
D) taxes on rents are undesirable because they have a severe disincentive effect on landlords. 
A) poverty is associated with the personal characteristics of individuals and therefore cannot be remedied by government antipoverty programs. 
B) economic rent could be heavily taxed without impairing the supply of land or, therefore, the productive capacity of the economy. 
C) rents should not be taxed, because rental income is the basic source of saving, which ultimately permits a high level of investment and economic growth. 
D) taxes on rents are undesirable because they have a severe disincentive effect on landlords.

Question 10

Critics of a single tax on land oppose the idea because

Accepted Answer

A) it would overtax the population. 
B) changes in land ownership would cause the tax burden to fall unfairly on people who did not receive economic rents. 
C) it would disproportionately tax the richest members of society. 
D) it would cause too much land to be brought out of production. 
A) it would overtax the population. 
B) changes in land ownership would cause the tax burden to fall unfairly on people who did not receive economic rents. 
C) it would disproportionately tax the richest members of society. 
D) it would cause too much land to be brought out of production.

Question 11

Effective usury laws

Accepted Answer

A) subsidize lenders. 
B) penalize those who borrow at the below-market interest rate. 
C) improve efficiency in investing. 
D) keep some low-income people from obtaining credit and loans. 
A) subsidize lenders. 
B) penalize those who borrow at the below-market interest rate. 
C) improve efficiency in investing. 
D) keep some low-income people from obtaining credit and loans.

Question 12

As interest rates decrease, the

Accepted Answer

A) cost of current relative to future consumption increases. 
B) cost of current relative to future consumption decreases. 
C) cost of current consumption relative to future consumption remains the same. 
D) desire of many individuals to save increases. 
A) cost of current relative to future consumption increases. 
B) cost of current relative to future consumption decreases. 
C) cost of current consumption relative to future consumption remains the same. 
D) desire of many individuals to save increases.

Question 13

Economists would not consider which one of the following to be a productive economic resource?

Accepted Answer

A) land 
B) capital goods 
C) money 
D) entrepreneurship 
A) land 
B) capital goods 
C) money 
D) entrepreneurship

Question 14

Entrepreneurs can generate economic profits by all of the following, except

Accepted Answer

A) developing popular new products. 
B) reducing production costs below rivals' costs. 
C) creating and maintaining monopoly power. 
D) laying off workers in order to cut costs. 
A) developing popular new products. 
B) reducing production costs below rivals' costs. 
C) creating and maintaining monopoly power. 
D) laying off workers in order to cut costs.

Question 15

If a factor of production has no production cost and has a fixed supply, then payments to that factor constitute what economists call

Accepted Answer

A) abnormal profits. 
B) economic rent. 
C) normal profits. 
D) interest payments. 
A) abnormal profits. 
B) economic rent. 
C) normal profits. 
D) interest payments.

Question 16

A given future value of money would have a smaller present value if

Accepted Answer

A) the interest rate used in discounting is higher. 
B) the length of time over which it is "discounted" is shorter. 
C) the interest rate is zero. 
D) there is no compounding of interest. 
A) the interest rate used in discounting is higher. 
B) the length of time over which it is "discounted" is shorter. 
C) the interest rate is zero. 
D) there is no compounding of interest.

Question 17

In general, if we compare two loans or bonds with the same loan size and taxability of interest-income, we would expect a higher interest rate on the loan or bond with a

Accepted Answer

A) higher risk and longer maturity. 
B) lower risk and longer maturity. 
C) lower risk and shorter maturity. 
D) higher risk and shorter maturity. 
A) higher risk and longer maturity. 
B) lower risk and longer maturity. 
C) lower risk and shorter maturity. 
D) higher risk and shorter maturity.

Question 18

Which of the following does not explain differences in rent for different parcels of land?

Accepted Answer

A) productivity differences 
B) demand differences 
C) supply-elasticity differences 
D) marginal-revenue-product differences 
A) productivity differences 
B) demand differences 
C) supply-elasticity differences 
D) marginal-revenue-product differences

Question 19

An increase in the demand for loanable funds may be caused by a(n)

Accepted Answer

A) increase in the availability of loanable funds. 
B) increase in consumers' willingness to save. 
C) increase in business borrowing. 
D) decrease in the interest rate. 
A) increase in the availability of loanable funds. 
B) increase in consumers' willingness to save. 
C) increase in business borrowing. 
D) decrease in the interest rate.

Question 20

(Consider This) The story about economist Irving Fisher's conversation with his masseuse illustrates that interest payments arise because of

Accepted Answer

A) the possibility of inflation. 
B) the reality of credit risk. 
C) imperfect information about the future. 
D) the time-value of money. 
A) the possibility of inflation. 
B) the reality of credit risk. 
C) imperfect information about the future. 
D) the time-value of money.

Exam 18: Rent, Interest, and Profit

Which factor will increase the demand for loanable funds?

The rent paid for the pasture land used to graze cattle would increase if

In time-value of money calculations, discounting is the reverse of compounding.

Currently, capitalist income, that is, corporate profits, interest, and rent, accounts for about what percentage of the income paid to American resource suppliers?

(Last Word) Suppose you deposit $5,000 in a bank that pays 10 percent interest compounded twice a year.The actual annual interest rate you receive is

The demand side, not supply, is the major factor determining how high land's rent will be.

Which of the following statements about economic profits is not correct?

Economists who have studied the composition of "proprietor's income" have found that this income item is made up of

In his book Progress and Poverty, Henry George argued that

Critics of a single tax on land oppose the idea because

Effective usury laws

As interest rates decrease, the

Economists would not consider which one of the following to be a productive economic resource?

Entrepreneurs can generate economic profits by all of the following, except

If a factor of production has no production cost and has a fixed supply, then payments to that factor constitute what economists call

A given future value of money would have a smaller present value if

In general, if we compare two loans or bonds with the same loan size and taxability of interest-income, we would expect a higher interest rate on the loan or bond with a

Which of the following does not explain differences in rent for different parcels of land?

An increase in the demand for loanable funds may be caused by a(n)

(Consider This) The story about economist Irving Fisher's conversation with his masseuse illustrates that interest payments arise because of

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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