Question 1

In the absence of a Ricardo-Barro effect, a government budget deficit ________ the demand for loanable funds and ________ investment.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 2

In 2008, the financial and housing crisis caused firms to decrease their profit expectations. As a result, there was a ________ in the ________ for loanable funds curve.

Accepted Answer

A)  leftward shift; demand 
B)  movement upward along; demand 
C)  leftward shift; supply 
D)  movement downward along; supply 
A)  leftward shift; demand 
B)  movement upward along; demand 
C)  leftward shift; supply 
D)  movement downward along; supply

Question 3

If two households have the same disposable income in the current year, the household with the

Accepted Answer

A)  higher expected future income will consume a larger portion of its current income today. 
B)  lower expected future income will consume more today while it has the money. 
C)  lower expected future income will spend a larger portion of its current income on consumption today because it will increase its saving in the future. 
D)  none of the above 
A)  higher expected future income will consume a larger portion of its current income today. 
B)  lower expected future income will consume more today while it has the money. 
C)  lower expected future income will spend a larger portion of its current income on consumption today because it will increase its saving in the future. 
D)  none of the above

Question 4

The Acme Stereo Company had a capital stock of $24 million at the beginning of the year. At the end of the year, the firm had a capital stock of $20 million. Thus its

Accepted Answer

A)  net investment was some amount but we need more information to determine the amount. 
B)  net investment was $4 million for the year. 
C)  gross investment was zero. 
D)  net investment was -$4 million for the year. 
A)  net investment was some amount but we need more information to determine the amount. 
B)  net investment was $4 million for the year. 
C)  gross investment was zero. 
D)  net investment was -$4 million for the year.

Question 5

In 2010, the United States and foreign economies start to recover from the recession. U.S. firms increase their profit expectations. As a result, the demand for loanable funds curve shifts ________ and the real interest rate ________.

Accepted Answer

A)  leftward; decreases 
B)  rightward; decreases 
C)  leftward; increases 
D)  rightward; increases 
A)  leftward; decreases 
B)  rightward; decreases 
C)  leftward; increases 
D)  rightward; increases

Question 6

The supply of loanable funds is the relationship between loanable funds and ________ other things remaining the same.

Accepted Answer

A)  real GDP 
B)  the price level 
C)  the real interest rate 
D)  the inflation rate 
A)  real GDP 
B)  the price level 
C)  the real interest rate 
D)  the inflation rate

Question 7

-In the above figure, the economy is at point a on the initial demand for loanable funds curve DLF0. What happens if the real interest rate rises?

Accepted Answer

A)  There is a movement to a point such as b on the demand for loanable funds curve DLF0. 
B)  The demand for loanable funds curve shifts rightward to a curve such as DLF2. 
C)  The demand for loanable funds curve shifts leftward to a curve such as DLF1. 
D)  none of the above 
A)  There is a movement to a point such as b on the demand for loanable funds curve DLF0. 
B)  The demand for loanable funds curve shifts rightward to a curve such as DLF2. 
C)  The demand for loanable funds curve shifts leftward to a curve such as DLF1. 
D)  none of the above

Question 8

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, then

Accepted Answer

A)  the real interest rate will rise. 
B)  firms will decrease their investment demand. 
C)  people will save more. 
D)  the real interest rate will fall. 
A)  the real interest rate will rise. 
B)  firms will decrease their investment demand. 
C)  people will save more. 
D)  the real interest rate will fall.

Question 9

Which of the following is FALSE about saving?

Accepted Answer

A)  Saving adds to wealth. 
B)  Income left after paying taxes can either be consumed or saved. 
C)  Saving equals wealth minus consumption expenditures. 
D)  Saving is the source of funds used to finance investment. 
A)  Saving adds to wealth. 
B)  Income left after paying taxes can either be consumed or saved. 
C)  Saving equals wealth minus consumption expenditures. 
D)  Saving is the source of funds used to finance investment.

Question 10

-In the above figure, technological progress that increases the expected profit will

Accepted Answer

A)  shift the demand for loanable funds curve leftward. 
B)  shift the demand for loanable funds curve rightward. 
C)  have no effect on the demand for loanable funds curve. 
D)  make the demand for loanable funds curve become horizontal. 
A)  shift the demand for loanable funds curve leftward. 
B)  shift the demand for loanable funds curve rightward. 
C)  have no effect on the demand for loanable funds curve. 
D)  make the demand for loanable funds curve become horizontal.

Question 11

In the loanable funds market, an increase in wealth shifts the ________ loanable funds curve ________.

Accepted Answer

A)  supply of; rightward 
B)  supply of; leftward 
C)  demand for; rightward 
D)  demand for; leftward 
A)  supply of; rightward 
B)  supply of; leftward 
C)  demand for; rightward 
D)  demand for; leftward

Question 12

-Use the information in the table above to calculate the value of national saving.

Accepted Answer

A)  -$15 million 
B)  $40 million 
C)  $25 million 
D)  $20 million 
A)  -$15 million 
B)  $40 million 
C)  $25 million 
D)  $20 million

Question 13

U.S. investment is financed from

Accepted Answer

A)  private saving, government budget surpluses, and borrowing from the rest of the world. 
B)  private saving, government budget deficits, and borrowing from the rest of the world. 
C)  private borrowing, government budget deficits, and lending to the rest of the world. 
D)  private saving and borrowing from the rest of the world only. 
A)  private saving, government budget surpluses, and borrowing from the rest of the world. 
B)  private saving, government budget deficits, and borrowing from the rest of the world. 
C)  private borrowing, government budget deficits, and lending to the rest of the world. 
D)  private saving and borrowing from the rest of the world only.

Question 14

If the nominal interest rate is 8 percent and inflation is 3 percent, approximately what is the real interest rate?

Accepted Answer

A)  11 percent 
B)  8 percent 
C)  5 percent 
D)  3 percent 
A)  11 percent 
B)  8 percent 
C)  5 percent 
D)  3 percent

Question 15

If Ann's disposable income increases, her saving decreases.

Accepted Answer

A) True 
 B)False

Question 16

If the real interest rate is above 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 real interest rate will fall. 
B)  borrowers will be unable to borrow all of the funds they want to borrow and the real interest rate will rise. 
C)  lenders will be unable to find borrowers willing to borrow all of the available funds and the real interest rate will rise. 
D)  borrowers will be unable to borrow all of the funds they want to borrow and the real interest rate will fall. 
A)  lenders will be unable to find borrowers willing to borrow all of the available funds and the real interest rate will fall. 
B)  borrowers will be unable to borrow all of the funds they want to borrow and the real interest rate will rise. 
C)  lenders will be unable to find borrowers willing to borrow all of the available funds and the real interest rate will rise. 
D)  borrowers will be unable to borrow all of the funds they want to borrow and the real interest rate will fall.

Question 17

-In the above figure, an increase in the expected profit will result in a movement from point E to

Accepted Answer

A)  point F. 
B)  point G. 
C)  point H. 
D)  point I. 
A)  point F. 
B)  point G. 
C)  point H. 
D)  point I.

Question 18

When the inflation rate is positive, the

Accepted Answer

A)  real interest rate is greater than the nominal interest rate. 
B)  real interest rate is less than the nominal interest rate. 
C)  nominal interest rate is zero. 
D)  real interest rate equals the nominal interest rate. 
A)  real interest rate is greater than the nominal interest rate. 
B)  real interest rate is less than the nominal interest rate. 
C)  nominal interest rate is zero. 
D)  real interest rate equals the nominal interest rate.

Question 19

The real interest rate

Accepted Answer

A)  can never be negative. 
B)  is approximately equal to the nominal interest rate plus the inflation rate. 
C)  is approximately equal to the nominal interest rate minus the inflation rate. 
D)  is positively related to the inflation rate. 
A)  can never be negative. 
B)  is approximately equal to the nominal interest rate plus the inflation rate. 
C)  is approximately equal to the nominal interest rate minus the inflation rate. 
D)  is positively related to the inflation rate.

Question 20

What are the factors that change investment demand and shift the demand for loanable funds curve?

Accepted Answer

Investment demand changes with the chang

In the absence of a Ricardo-Barro effect, a government budget deficit the demand for loanable funds and investment.

In 2008, the financial and housing crisis caused firms to decrease their profit expectations. As a result, there was a in the for loanable funds curve.

If two households have the same disposable income in the current year, the household with the

The Acme Stereo Company had a capital stock of $24 million at the beginning of the year. At the end of the year, the firm had a capital stock of $20 million. Thus its

In 2010, the United States and foreign economies start to recover from the recession. U.S. firms increase their profit expectations. As a result, the demand for loanable funds curve shifts and the real interest rate .

The supply of loanable funds is the relationship between loanable funds and ________ other things remaining the same.

-In the above figure, the economy is at point a on the initial demand for loanable funds curve DLF₀. What happens if the real interest rate rises?

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, then

Which of the following is FALSE about saving?

-In the above figure, technological progress that increases the expected profit will

In the loanable funds market, an increase in wealth shifts the loanable funds curve .

-Use the information in the table above to calculate the value of national saving.

U.S. investment is financed from

If the nominal interest rate is 8 percent and inflation is 3 percent, approximately what is the real interest rate?

If Ann's disposable income increases, her saving decreases.

If the real interest rate is above the equilibrium real interest rate

-In the above figure, an increase in the expected profit will result in a movement from point E to

When the inflation rate is positive, the

The real interest rate

What are the factors that change investment demand and shift the demand for loanable funds curve?

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

In the absence of a Ricardo-Barro effect, a government budget deficit ________ the demand for loanable funds and ________ investment.

In 2008, the financial and housing crisis caused firms to decrease their profit expectations. As a result, there was a ________ in the ________ for loanable funds curve.

If two households have the same disposable income in the current year, the household with the

The Acme Stereo Company had a capital stock of $24 million at the beginning of the year. At the end of the year, the firm had a capital stock of $20 million. Thus its

In 2010, the United States and foreign economies start to recover from the recession. U.S. firms increase their profit expectations. As a result, the demand for loanable funds curve shifts ________ and the real interest rate ________.

The supply of loanable funds is the relationship between loanable funds and ________ other things remaining the same.

-In the above figure, the economy is at point a on the initial demand for loanable funds curve DLF0. What happens if the real interest rate rises?

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, then

Which of the following is FALSE about saving?

-In the above figure, technological progress that increases the expected profit will

In the loanable funds market, an increase in wealth shifts the ________ loanable funds curve ________.

-Use the information in the table above to calculate the value of national saving.

U.S. investment is financed from

If the nominal interest rate is 8 percent and inflation is 3 percent, approximately what is the real interest rate?

If Ann's disposable income increases, her saving decreases.

If the real interest rate is above the equilibrium real interest rate

-In the above figure, an increase in the expected profit will result in a movement from point E to

When the inflation rate is positive, the

The real interest rate

What are the factors that change investment demand and shift the demand for loanable funds curve?

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

In the absence of a Ricardo-Barro effect, a government budget deficit the demand for loanable funds and investment.

In 2008, the financial and housing crisis caused firms to decrease their profit expectations. As a result, there was a in the for loanable funds curve.

In 2010, the United States and foreign economies start to recover from the recession. U.S. firms increase their profit expectations. As a result, the demand for loanable funds curve shifts and the real interest rate .

-In the above figure, the economy is at point a on the initial demand for loanable funds curve DLF₀. What happens if the real interest rate rises?

In the loanable funds market, an increase in wealth shifts the loanable funds curve .