Question 1

A fall in the real interest rate

Accepted Answer

A)  results in a movement along the demand for loanable funds curve. 
B)  shifts the demand for loanable funds curve rightward. 
C)  shifts the demand for loanable funds curve leftward. 
D)  has no effect on the demand for loanable funds curve 
A)  results in a movement along the demand for loanable funds curve. 
B)  shifts the demand for loanable funds curve rightward. 
C)  shifts the demand for loanable funds curve leftward. 
D)  has no effect on the demand for loanable funds curve

Question 2

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 net investment for the year totaled

Accepted Answer

A)  1 machine. 
B)  2 machines. 
C)  3 machines. 
D)  6 machines. 
A)  1 machine. 
B)  2 machines. 
C)  3 machines. 
D)  6 machines.

Question 3

At the beginning of the year, your wealth is $10,000. During the year, you have an income of $90,000 and you spend $80,000 on consumption. You pay no taxes. Your wealth at the end of the year is

Accepted Answer

A)  $20,000.00. 
B)  $0. 
C)  $90,000.00. 
D)  $100,000.00. 
A)  $20,000.00. 
B)  $0. 
C)  $90,000.00. 
D)  $100,000.00.

Question 4

If disposable income increases, people will decide to ________ saving, the supply of loanable funds will ________ and the real interest rate will ________.

Accepted Answer

A)  increase; decrease; rise 
B)  decrease; decrease; rise 
C)  increase; increase; fall 
D)  decrease; increase; fall 
A)  increase; decrease; rise 
B)  decrease; decrease; rise 
C)  increase; increase; fall 
D)  decrease; increase; fall

Question 5

An increase in the real interest rate results in a

Accepted Answer

A)  rightward shift in the supply of loanable funds curve. 
B)  leftward shift in the supply of loanable funds curve. 
C)  movement along the supply of loanable funds curve. 
D)  none of the above. 
A)  rightward shift in the supply of loanable funds curve. 
B)  leftward shift in the supply of loanable funds curve. 
C)  movement along the supply of loanable funds curve. 
D)  none of the above.

Question 6

Net investment equals

Accepted Answer

A)  capital stock minus depreciation. 
B)  gross investment minus depreciation. 
C)  the total quantity of plant, equipment and buildings. 
D)  gross investment/depreciation. 
A)  capital stock minus depreciation. 
B)  gross investment minus depreciation. 
C)  the total quantity of plant, equipment and buildings. 
D)  gross investment/depreciation.

Question 7

The Ricardo-Barro effect holds that

Accepted Answer

A)  equal increases in taxes and government expenditures have no effect on equilibrium real GDP. 
B)  government budget deficits have no effect on the real interest rate. 
C)  a government budget deficit crowds out private investment. 
D)  a government budget deficit induces a decrease in saving that magnifies the crowding out effect. 
A)  equal increases in taxes and government expenditures have no effect on equilibrium real GDP. 
B)  government budget deficits have no effect on the real interest rate. 
C)  a government budget deficit crowds out private investment. 
D)  a government budget deficit induces a decrease in saving that magnifies the crowding out effect.

Question 8

A financial decision should be pursued when

Accepted Answer

A)  the interest rate falls. 
B)  the net present value is negative. 
C)  the interest rate rises. 
D)  the net present value is positive. 
A)  the interest rate falls. 
B)  the net present value is negative. 
C)  the interest rate rises. 
D)  the net present value is positive.

Question 9

Suppose a firm has an investment project which will cost $200,000 and result in $30,000 profit. The firm will not undertake the project if the interest rate is

Accepted Answer

A)  greater than 15 percent. 
B)  greater than 10 percent. 
C)  greater than 5 percent. 
D)  positive. 
A)  greater than 15 percent. 
B)  greater than 10 percent. 
C)  greater than 5 percent. 
D)  positive.

Question 10

In 2007, France's GDP totaled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. To calculate the amount of net investment in France for these years, you need to know

Accepted Answer

A)  saving. 
B)  depreciation. 
C)  the amount of financial capital available. 
D)  the aggregate production function. 
A)  saving. 
B)  depreciation. 
C)  the amount of financial capital available. 
D)  the aggregate production function.

Question 11

How does expected future income affect saving supply?

Accepted Answer

Expected future income affects

Question 12

There is a positive relationship between the demand for loanable funds and the real interest rate.

Accepted Answer

A) True 
 B)False

Question 13

If foreigners spend more on U.S.-made goods and services than we spend on theirs

Accepted Answer

A)  foreigners must borrow from the United States or sell U.S. assets to make up the difference. 
B)  all U.S. national saving remains in the United States. 
C)  we must borrow from foreigners because of low imports. 
D)  funds flow in from abroad to help finance U.S. investment. 
A)  foreigners must borrow from the United States or sell U.S. assets to make up the difference. 
B)  all U.S. national saving remains in the United States. 
C)  we must borrow from foreigners because of low imports. 
D)  funds flow in from abroad to help finance U.S. investment.

Question 14

Explain how each of the following events affect the supply of loanable funds curve:
a) The economy is in a recession so people's disposable income is lower.
b) The stock market is booming so the people's wealth is higher.
c) Fewer college graduates are finding jobs so expected future income is lower.
d) The real interest rate increases.

Accepted Answer

a) Disposable income is lower, so saving

Question 15

The demand for loanable funds curve is

Accepted Answer

A)  downward sloping when plotted against the real interest rate. 
B)  vertical at the full employment level of investment. 
C)  constant at the maximum expected profit rate. 
D)  upward sloping when plotted against the real interest rate. 
A)  downward sloping when plotted against the real interest rate. 
B)  vertical at the full employment level of investment. 
C)  constant at the maximum expected profit rate. 
D)  upward sloping when plotted against the real interest rate.

Question 16

According to the Ricardo-Barro effect

Accepted Answer

A)  government deficits raise the real interest rate. 
B)  taxpayers fail to foresee that government deficits imply higher future taxes. 
C)  households increase their personal saving when governments run budget deficits. 
D)  government budget deficits increase households' expected future disposable income. 
A)  government deficits raise the real interest rate. 
B)  taxpayers fail to foresee that government deficits imply higher future taxes. 
C)  households increase their personal saving when governments run budget deficits. 
D)  government budget deficits increase households' expected future disposable income.

Question 17

The table below shows data for the U.S.   Between 2014 and 2015 the real interest rate ________ and caused a ________ the demand for loanable funds curve.

Accepted Answer

A)  increased; rightward shift 
B)  decreased; movement down along 
C)  increased; movement up along 
D)  decreased; leftward shift 
A)  increased; rightward shift 
B)  decreased; movement down along 
C)  increased; movement up along 
D)  decreased; leftward shift

Question 18

Which of the following influences household saving?
I. The real interest rate
II. Disposable income
III. Expected future income

Accepted Answer

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

Question 19

A share of Apple stock has a price of $430 and gives $43 of Apple profit to its owner. The interest rate on this share is

Accepted Answer

A)  10 percent. 
B)  $430. 
C)  15.4 percent 
D)  $43. 
A)  10 percent. 
B)  $430. 
C)  15.4 percent 
D)  $43.

Question 20

Suppose the current real interest rate is 4 percent and the equilibrium real interest rate is 3 percent. Then

Accepted Answer

A)  prices rise and inflation occurs. 
B)  there is a surplus of loanable funds. 
C)  there is a shortage of loanable funds. 
D)  there is neither a shortage nor surplus of loanable funds. 
A)  prices rise and inflation occurs. 
B)  there is a surplus of loanable funds. 
C)  there is a shortage of loanable funds. 
D)  there is neither a shortage nor surplus of loanable funds.

A fall in the real interest rate

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 net investment for the year totaled

At the beginning of the year, your wealth is $10,000. During the year, you have an income of $90,000 and you spend $80,000 on consumption. You pay no taxes. Your wealth at the end of the year is

If disposable income increases, people will decide to saving, the supply of loanable funds will and the real interest rate will .

An increase in the real interest rate results in a

Net investment equals

The Ricardo-Barro effect holds that

A financial decision should be pursued when

Suppose a firm has an investment project which will cost $200,000 and result in $30,000 profit. The firm will not undertake the project if the interest rate is

In 2007, France's GDP totaled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. To calculate the amount of net investment in France for these years, you need to know

How does expected future income affect saving supply?

There is a positive relationship between the demand for loanable funds and the real interest rate.

If foreigners spend more on U.S.-made goods and services than we spend on theirs

The demand for loanable funds curve is

According to the Ricardo-Barro effect

The table below shows data for the U.S. Between 2014 and 2015 the real interest rate and caused a the demand for loanable funds curve.

Which of the following influences household saving? I. The real interest rate II. Disposable income III. Expected future income

A share of Apple stock has a price of $430 and gives $43 of Apple profit to its owner. The interest rate on this share is

Suppose the current real interest rate is 4 percent and the equilibrium real interest rate is 3 percent. Then

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

A fall in the real interest rate

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 net investment for the year totaled

At the beginning of the year, your wealth is $10,000. During the year, you have an income of $90,000 and you spend $80,000 on consumption. You pay no taxes. Your wealth at the end of the year is

If disposable income increases, people will decide to ________ saving, the supply of loanable funds will ________ and the real interest rate will ________.

An increase in the real interest rate results in a

Net investment equals

The Ricardo-Barro effect holds that

A financial decision should be pursued when

Suppose a firm has an investment project which will cost $200,000 and result in $30,000 profit. The firm will not undertake the project if the interest rate is

In 2007, France's GDP totaled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. To calculate the amount of net investment in France for these years, you need to know

How does expected future income affect saving supply?

There is a positive relationship between the demand for loanable funds and the real interest rate.

If foreigners spend more on U.S.-made goods and services than we spend on theirs

The demand for loanable funds curve is

According to the Ricardo-Barro effect

The table below shows data for the U.S. Between 2014 and 2015 the real interest rate ________ and caused a ________ the demand for loanable funds curve.

Which of the following influences household saving? I. The real interest rate II. Disposable income III. Expected future income

A share of Apple stock has a price of $430 and gives $43 of Apple profit to its owner. The interest rate on this share is

Suppose the current real interest rate is 4 percent and the equilibrium real interest rate is 3 percent. Then

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 disposable income increases, people will decide to saving, the supply of loanable funds will and the real interest rate will .

The table below shows data for the U.S. Between 2014 and 2015 the real interest rate and caused a the demand for loanable funds curve.