Exam 7: Finance, Saving, and Investment

Suppose the United States spends more on foreign goods and services than foreigners spend on our goods and services and the United States sells no foreign assets. Then the

-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF₀. What happens if the real interest rate rises?

The total amount spent on new capital in a time period is equal to

-In the above figure, the initial supply of loanable funds curve is SLF₀ and the demand for loanable funds investment curve is DLF₀. An increase in the real interest rate to 7 percent could be caused by

Which of the following is CORRECT?

-In the above figure, new expectations of booming business conditions and a higher expected profit will

Suppose that, initially, the nominal interest rate is 6 percent and the inflation rate is 3 percent. If the inflation rate increases to 6 percent, what will be the new nominal interest rate?

When the real interest rate rises

A decrease in the real interest rate leads to

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 capital stock at the end of year equals

Explain the relationship between the real interest rate and the demand for loanable funds. Compare that relationship to the relationship between expected profit and the demand for loanable funds.

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 gross investment for the year totaled

In 2008, Australia had a government budget surplus of $21.7 billion. This budget surplus shifts the demand for loanable funds curve

In the loanable funds market, as the interest rate rises the ________ and the ________.

A rise in the real interest rate

Suppose Molly has an income of $35,000 annually and has inherited a savings account of $20,000. Wyatt has a job that pays $35,000 annually, but has debts totaling $6,000. Which of the following is TRUE?

The nominal interest rate minus the real interest rate approximately equals the

In January, suppose that a share of stock in Meyer, Inc. had a price of $50 and that each share entitled its owner to $2 of Meyer, Inc.'s profit. During the year, the price of a share of Meyer's stock rose to $100. The interest rate paid on the share in January was ________ percent.

Suppose the real interest rate rises and the quantity of loanable funds increases. These changes could have been the result of

If the government has a budget deficit, crowding out might occur. Crowding out leads to all of the following EXCEPT