Question 1

Which of the following shifts the demand for loanable funds curve leftward?

Accepted Answer

A)  a fall in the real interest rate 
B)  a rise in the real interest rate 
C)  a decrease in the taxes paid by the business 
D)  a decrease in the expected profit 
A)  a fall in the real interest rate 
B)  a rise in the real interest rate 
C)  a decrease in the taxes paid by the business 
D)  a decrease in the expected profit D

Question 2

Which of the following have a positive relationship with household saving?
I. the real interest rate
II. disposable income
III. expected future income

Accepted Answer

A)  I and II 
B)  II only 
C)  II and III 
D)  I, II and III 
A)  I and II 
B)  II only 
C)  II and III 
D)  I, II and III A

Question 3

The term "capital," as used in macroeconomics, refers to

Accepted Answer

A)  the plant, equipment, buildings, and inventories of raw materials and semi-finished goods. 
B)  financial wealth. 
C)  the sum of investment and government purchases of goods. 
D)  investment. 
A)  the plant, equipment, buildings, and inventories of raw materials and semi-finished goods. 
B)  financial wealth. 
C)  the sum of investment and government purchases of goods. 
D)  investment. A

Question 4

If net taxes exceed government expenditures, the government sector has a budget ________ and government saving is ________.

Accepted Answer

A)  surplus; positive 
B)  surplus; negative 
C)  deficit; positive 
D)  deficit; negative 
A)  surplus; positive 
B)  surplus; negative 
C)  deficit; positive 
D)  deficit; negative

Question 5

The increase in the capital stock equals the amount of

Accepted Answer

A)  gross investment. 
B)  depreciation. 
C)  net investment. 
D)  private sector spending. 
A)  gross investment. 
B)  depreciation. 
C)  net investment. 
D)  private sector spending.

Question 6

Suppose a bond promises to pay its holder $100 a year forever. The interest rate on the bond rises from 4 percent to 5 percent. The price of the bond

Accepted Answer

A)  falls from $2,500 to $2,000. 
B)  does not change because it is not affected by the interest rate. 
C)  falls from $25,000 to $20,000. 
D)  rises from $2,000 to $2,500. 
A)  falls from $2,500 to $2,000. 
B)  does not change because it is not affected by the interest rate. 
C)  falls from $25,000 to $20,000. 
D)  rises from $2,000 to $2,500.

Question 7

How does an increase in the expected profit affect investment demand and the demand for loanable funds curve?

Accepted Answer

An increase in the expected profit incre

Question 8

If U.S. exports are $2.2 billion and our imports are $2.7 billion

Accepted Answer

A)  the United States is lending to the rest of the world. 
B)  U.S. national saving is too high. 
C)  the United States is borrowing from the rest of the world. 
D)  U.S. investment must decrease. 
A)  the United States is lending to the rest of the world. 
B)  U.S. national saving is too high. 
C)  the United States is borrowing from the rest of the world. 
D)  U.S. investment must decrease.

Question 9

Which of the following is TRUE regarding the effect expected future income has on saving?
I. As expected future income increases, saving increases.
II. Young people typically save very little.
III. Middle aged people, earning higher incomes, are not very big savers.

Accepted Answer

A)  I and III 
B)  II only 
C)  III only 
D)  II and III 
A)  I and III 
B)  II only 
C)  III only 
D)  II and III

Question 10

In January 2015, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the equipment fell by 30 percent. During 2015, Tim spent $200,000 on new machines. During 2015, Tim's gross investment totaled

Accepted Answer

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

Question 11

-In the above figure, if the real interest rate is 4 percent, then there

Accepted Answer

A)  there is a surplus of loanable funds. 
B)  is equilibrium in the loanable funds market. 
C)  the real interest rate will rise. 
D)  the demand curve for loanable funds will shift rightward. 
A)  there is a surplus of loanable funds. 
B)  is equilibrium in the loanable funds market. 
C)  the real interest rate will rise. 
D)  the demand curve for loanable funds will shift rightward.

Question 12

In January 2013, you can put your savings in a Bank of America account and be paid 2 percent per year. During 2013, suppose the inflation rate is 3.4 percent. In 2013 you earned a real interest rate of

Accepted Answer

A)  0.59 percent. 
B)  6.8 percent. 
C)  1.4 percent. 
D)  -1.4 percent. 
A)  0.59 percent. 
B)  6.8 percent. 
C)  1.4 percent. 
D)  -1.4 percent.

Question 13

Which of the following is TRUE regarding the real interest rate?
I. The real interest rate is the opportunity cost of borrowed funds.
II. The real interest rate equals the nominal interest rate adjusted for inflation.

Accepted Answer

A)  I 
B)  II 
C)  both I and II 
D)  neither I nor II 
A)  I 
B)  II 
C)  both I and II 
D)  neither I nor II

Question 14

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

Question 15

Greater optimism about the expected profits from investment projects

Accepted Answer

A)  shifts the demand for loanable funds curve rightward. 
B)  shifts the demand for loanable funds curve leftward. 
C)  causes a movement upward along the demand for loanable funds curve. 
D)  causes a movement downward along the demand for loanable funds curve. 
A)  shifts the demand for loanable funds curve rightward. 
B)  shifts the demand for loanable funds curve leftward. 
C)  causes a movement upward along the demand for loanable funds curve. 
D)  causes a movement downward along the demand for loanable funds curve.

Question 16

Which of the following explains why the demand for loanable funds is negatively related to the real interest rate?

Accepted Answer

A)  A lower real interest rate makes more investment projects profitable. 
B)  Consumers are willing to spend less and hence save more at higher real interest rates. 
C)  Interest rate flexibility in financial markets assures an equilibrium in which saving equals investment. 
D)  All of the above are reasons why the demand for loanable funds is negatively related to the real interest rate. 
A)  A lower real interest rate makes more investment projects profitable. 
B)  Consumers are willing to spend less and hence save more at higher real interest rates. 
C)  Interest rate flexibility in financial markets assures an equilibrium in which saving equals investment. 
D)  All of the above are reasons why the demand for loanable funds is negatively related to the real interest rate.

Question 17

-In the above figure, the demand for loanable funds curve is drawn for the average expected profit. If the real interest rate is constant at 6 percent and the expected profit falls, the amount of loanable funds demanded will be

Accepted Answer

A)  less than $450 billion. 
B)  $450 billion. 
C)  between $450 billion and $600 billion. 
D)  greater than $600 billion. 
A)  less than $450 billion. 
B)  $450 billion. 
C)  between $450 billion and $600 billion. 
D)  greater than $600 billion.

Question 18

In 2008, Germany had a budget deficit of 37 billion euros. This will budget deficit ________ the supply of loanable funds and ________ the real interest rate.

Accepted Answer

A)  increased; lowered 
B)  decreased; raised 
C)  decreased; lowered 
D)  increased; raised 
A)  increased; lowered 
B)  decreased; raised 
C)  decreased; lowered 
D)  increased; raised

Question 19

The present value of $200 one year from now when the interest rate is 7 percent is

Accepted Answer

A)  $207 
B)  $214 
C)  $175 
D)  $187 
A)  $207 
B)  $214 
C)  $175 
D)  $187

Question 20

Other things remaining the same, the greater the expected profit

Accepted Answer

A)  the less the amount of investment. 
B)  the greater the amount of investment. 
C)  the steeper is the investment demand curve. 
D)  the flatter is the investment demand curve. 
A)  the less the amount of investment. 
B)  the greater the amount of investment. 
C)  the steeper is the investment demand curve. 
D)  the flatter is the investment demand curve.

Which of the following shifts the demand for loanable funds curve leftward?

Which of the following have a positive relationship with household saving? I. the real interest rate II. disposable income III. expected future income

The term "capital," as used in macroeconomics, refers to

If net taxes exceed government expenditures, the government sector has a budget and government saving is .

The increase in the capital stock equals the amount of

Suppose a bond promises to pay its holder $100 a year forever. The interest rate on the bond rises from 4 percent to 5 percent. The price of the bond

How does an increase in the expected profit affect investment demand and the demand for loanable funds curve?

If U.S. exports are $2.2 billion and our imports are $2.7 billion

Which of the following is TRUE regarding the effect expected future income has on saving? I. As expected future income increases, saving increases. II. Young people typically save very little. III. Middle aged people, earning higher incomes, are not very big savers.

In January 2015, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the equipment fell by 30 percent. During 2015, Tim spent $200,000 on new machines. During 2015, Tim's gross investment totaled

-In the above figure, if the real interest rate is 4 percent, then there

In January 2013, you can put your savings in a Bank of America account and be paid 2 percent per year. During 2013, suppose the inflation rate is 3.4 percent. In 2013 you earned a real interest rate of

Which of the following is TRUE regarding the real interest rate? I. The real interest rate is the opportunity cost of borrowed funds. II. The real interest rate equals the nominal interest rate adjusted for inflation.

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

Greater optimism about the expected profits from investment projects

Which of the following explains why the demand for loanable funds is negatively related to the real interest rate?

-In the above figure, the demand for loanable funds curve is drawn for the average expected profit. If the real interest rate is constant at 6 percent and the expected profit falls, the amount of loanable funds demanded will be

In 2008, Germany had a budget deficit of 37 billion euros. This will budget deficit the supply of loanable funds and the real interest rate.

The present value of $200 one year from now when the interest rate is 7 percent is

Other things remaining the same, the greater the expected profit

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

Which of the following shifts the demand for loanable funds curve leftward?

Which of the following have a positive relationship with household saving? I. the real interest rate II. disposable income III. expected future income

The term "capital," as used in macroeconomics, refers to

If net taxes exceed government expenditures, the government sector has a budget ________ and government saving is ________.

The increase in the capital stock equals the amount of

Suppose a bond promises to pay its holder $100 a year forever. The interest rate on the bond rises from 4 percent to 5 percent. The price of the bond

How does an increase in the expected profit affect investment demand and the demand for loanable funds curve?

If U.S. exports are $2.2 billion and our imports are $2.7 billion

Which of the following is TRUE regarding the effect expected future income has on saving? I. As expected future income increases, saving increases. II. Young people typically save very little. III. Middle aged people, earning higher incomes, are not very big savers.

In January 2015, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the equipment fell by 30 percent. During 2015, Tim spent $200,000 on new machines. During 2015, Tim's gross investment totaled

-In the above figure, if the real interest rate is 4 percent, then there

In January 2013, you can put your savings in a Bank of America account and be paid 2 percent per year. During 2013, suppose the inflation rate is 3.4 percent. In 2013 you earned a real interest rate of

Which of the following is TRUE regarding the real interest rate? I. The real interest rate is the opportunity cost of borrowed funds. II. The real interest rate equals the nominal interest rate adjusted for inflation.

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

Greater optimism about the expected profits from investment projects

Which of the following explains why the demand for loanable funds is negatively related to the real interest rate?

-In the above figure, the demand for loanable funds curve is drawn for the average expected profit. If the real interest rate is constant at 6 percent and the expected profit falls, the amount of loanable funds demanded will be

In 2008, Germany had a budget deficit of 37 billion euros. This will budget deficit ________ the supply of loanable funds and ________ the real interest rate.

The present value of $200 one year from now when the interest rate is 7 percent is

Other things remaining the same, the greater the expected profit

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

If net taxes exceed government expenditures, the government sector has a budget and government saving is .

In 2008, Germany had a budget deficit of 37 billion euros. This will budget deficit the supply of loanable funds and the real interest rate.