Question 1

Other things remaining the same, if the interest rate falls,

Accepted Answer

A)  the net present value of a project will be always be positive. 
B)  the net present value of a project will be always be negative. 
C)  the net present value of a project always falls. 
D)  the net present value of a project always rises. 
A)  the net present value of a project will be always be positive. 
B)  the net present value of a project will be always be negative. 
C)  the net present value of a project always falls. 
D)  the net present value of a project always rises.

Question 2

As a result of the recession in 2008, the default risk increased. How did this change affect the loanable funds market?

Accepted Answer

A)  There was a movement up along the supply of loanable funds curve. 
B)  There was a leftward shift in the supply of loanable funds curve. 
C)  There was a movement down along the demand for loanable funds curve. 
D)  There was a rightward shift in the supply of loanable funds curve. 
A)  There was a movement up along the supply of loanable funds curve. 
B)  There was a leftward shift in the supply of loanable funds curve. 
C)  There was a movement down along the demand for loanable funds curve. 
D)  There was a rightward shift in the supply of loanable funds curve.

Question 3

The ________ the expected profit, the greater is the ________.

Accepted Answer

A)  lower; investment demand 
B)  higher; investment demand 
C)  lower; capital stock 
D)  None of the above answers is correct 
A)  lower; investment demand 
B)  higher; investment demand 
C)  lower; capital stock 
D)  None of the above answers is correct

Question 4

Gross investment

Accepted Answer

A)  is the purchase of new capital. 
B)  includes only replacement investment. 
C)  does not include additions to inventories. 
D)  Both answers A and B are correct. 
A)  is the purchase of new capital. 
B)  includes only replacement investment. 
C)  does not include additions to inventories. 
D)  Both answers A and B are correct.

Question 5

Sarah and Diane are both billing clerks for the local trucking company earning $17,000 per year. Sarah is attending college, plans to graduate in one year and earn $55,000 as an economist. Diane is not in college or undergoing any specialized training and will have the same job next year. According to economic theory, which of the two individuals would tend to have a higher current savings rate?

Accepted Answer

A)  Diane 
B)  Sarah 
C)  Both will have the same saving rate. 
D)  Economic theory sheds no light on this question. 
A)  Diane 
B)  Sarah 
C)  Both will have the same saving rate. 
D)  Economic theory sheds no light on this question.

Question 6

If China's government runs a budget surplus and there is no Ricardo-Barro effect, there will be ________ in the supply of loanable funds, private saving ________ and investment ________.

Accepted Answer

A)  an increase; decreases; increases 
B)  a decrease; increases; increases 
C)  an increase; increases; increases 
D)  a decrease; decrease; increases 
A)  an increase; decreases; increases 
B)  a decrease; increases; increases 
C)  an increase; increases; increases 
D)  a decrease; decrease; increases

Question 7

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. Suppose that depreciation is 12 percent of GDP. ________ investment in 2007 was ________ billion.

Accepted Answer

A)  Gross; $216 
B)  Gross; $129 
C)  Net; $228 
D)  Net; $129 
A)  Gross; $216 
B)  Gross; $129 
C)  Net; $228 
D)  Net; $129

Question 8

When a government has a budget surplus, the surplus

Accepted Answer

A)  helps finance investment. 
B)  crowds-out private saving. 
C)  must be subtracted from private saving to get total saving. 
D)  increases the world real interest rate. 
A)  helps finance investment. 
B)  crowds-out private saving. 
C)  must be subtracted from private saving to get total saving. 
D)  increases the world real interest rate.

Question 9

An increase in the real interest rate ________ the quantity of loanable funds supplied and ________ the quantity of loanable funds demanded.

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 10

The funds used to buy and operate physical capital are

Accepted Answer

A)  depreciation. 
B)  financial capital. 
C)  saving. 
D)  wealth. 
A)  depreciation. 
B)  financial capital. 
C)  saving. 
D)  wealth.

Question 11

In November 2008, automobile executives from Ford, GM and Chrysler testified to Congress that their firms needed a $25 billion bailout to prevent bankruptcies. The executives stated that part of the cash would be used to re-design production lines. The $25 billion is ________ and the re-designed production lines are ________.

Accepted Answer

A)  financial capital; physical capital 
B)  gross investment; physical capital 
C)  physical capital; financial capital 
D)  net investment; gross investment 
A)  financial capital; physical capital 
B)  gross investment; physical capital 
C)  physical capital; financial capital 
D)  net investment; gross investment

Question 12

An increase in disposable income

Accepted Answer

A)  has no effect on the supply of loanable funds curve. 
B)  shifts the supply of loanable funds curve rightward. 
C)  shifts the supply of loanable funds curve leftward. 
D)  results in movement up the supply of loanable funds curve. 
A)  has no effect on the supply of loanable funds curve. 
B)  shifts the supply of loanable funds curve rightward. 
C)  shifts the supply of loanable funds curve leftward. 
D)  results in movement up the supply of loanable funds curve.

Question 13

If the real interest rate rises, people

Accepted Answer

A)  save more. 
B)  save less. 
C)  earn a higher real wage rate. 
D)  decrease their expected future income. 
A)  save more. 
B)  save less. 
C)  earn a higher real wage rate. 
D)  decrease their expected future income.

Question 14

This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is ________ and its net investment is ________.

Accepted Answer

A)  $1.3 billion; $1.6 billion 
B)  $1.0 billion; $1.3 billion 
C)  $1.3 billion; $1.0 billion 
D)  $1.0 billion; $0.7 billion 
A)  $1.3 billion; $1.6 billion 
B)  $1.0 billion; $1.3 billion 
C)  $1.3 billion; $1.0 billion 
D)  $1.0 billion; $0.7 billion

Question 15

Suppose the market for loanable funds is in equilibrium. If disposable income increases, the equilibrium real interest rate ________ and the quantity of loanable funds ________.

Accepted Answer

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

Question 16

If the nominal interest rate is 11 percent and the inflation rate is 9 percent, then the real interest rate is approximately

Accepted Answer

A)  2 percent. 
B)  20 percent. 
C)  4 percent. 
D)  18 percent. 
A)  2 percent. 
B)  20 percent. 
C)  4 percent. 
D)  18 percent.

Question 17

What is the influence of the expected profit and the real interest rate on the amount of investment firms make?

Accepted Answer

Firms make a decision about whether to u

Question 18

-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if disposable income decreases?

Accepted Answer

A)  Nothing; the economy would remain at point a. 
B)  There would be a movement to a point such as b on supply of loanable funds curve SLF0. 
C)  The supply of loanable funds curve would shift rightward to a curve such as SLF2. 
D)  The supply of loanable funds curve would shift leftward to a curve such as SLF1. 
A)  Nothing; the economy would remain at point a. 
B)  There would be a movement to a point such as b on supply of loanable funds curve SLF0. 
C)  The supply of loanable funds curve would shift rightward to a curve such as SLF2. 
D)  The supply of loanable funds curve would shift leftward to a curve such as SLF1.

Question 19

Households will choose to save more if

Accepted Answer

A)  income is expected to decrease in the future. 
B)  current disposable income increases. 
C)  Both answers A and B are correct. 
D)  Neither answer A nor B is correct. 
A)  income is expected to decrease in the future. 
B)  current disposable income increases. 
C)  Both answers A and B are correct. 
D)  Neither answer A nor B is correct.

Question 20

The term "crowding out" relates to the decrease in

Accepted Answer

A)  consumption expenditure from an increase in investment. 
B)  the real interest rate from a government budget deficit. 
C)  private investment from a government budget deficit. 
D)  saving from an increase in disposable income. 
A)  consumption expenditure from an increase in investment. 
B)  the real interest rate from a government budget deficit. 
C)  private investment from a government budget deficit. 
D)  saving from an increase in disposable income.

Other things remaining the same, if the interest rate falls,

As a result of the recession in 2008, the default risk increased. How did this change affect the loanable funds market?

The the expected profit, the greater is the .

Gross investment

If China's government runs a budget surplus and there is no Ricardo-Barro effect, there will be in the supply of loanable funds, private saving and investment .

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. Suppose that depreciation is 12 percent of GDP. investment in 2007 was billion.

When a government has a budget surplus, the surplus

An increase in the real interest rate the quantity of loanable funds supplied and the quantity of loanable funds demanded.

The funds used to buy and operate physical capital are

An increase in disposable income

If the real interest rate rises, people

This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is and its net investment is .

Suppose the market for loanable funds is in equilibrium. If disposable income increases, the equilibrium real interest rate and the quantity of loanable funds .

If the nominal interest rate is 11 percent and the inflation rate is 9 percent, then the real interest rate is approximately

What is the influence of the expected profit and the real interest rate on the amount of investment firms make?

-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF₀. What happens if disposable income decreases?

Households will choose to save more if

The term "crowding out" relates to the decrease in

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

Other things remaining the same, if the interest rate falls,

As a result of the recession in 2008, the default risk increased. How did this change affect the loanable funds market?

The ________ the expected profit, the greater is the ________.

Gross investment

If China's government runs a budget surplus and there is no Ricardo-Barro effect, there will be ________ in the supply of loanable funds, private saving ________ and investment ________.

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. Suppose that depreciation is 12 percent of GDP. ________ investment in 2007 was ________ billion.

When a government has a budget surplus, the surplus

An increase in the real interest rate ________ the quantity of loanable funds supplied and ________ the quantity of loanable funds demanded.

The funds used to buy and operate physical capital are

An increase in disposable income

If the real interest rate rises, people

This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is ________ and its net investment is ________.

Suppose the market for loanable funds is in equilibrium. If disposable income increases, the equilibrium real interest rate ________ and the quantity of loanable funds ________.

If the nominal interest rate is 11 percent and the inflation rate is 9 percent, then the real interest rate is approximately

What is the influence of the expected profit and the real interest rate on the amount of investment firms make?

-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if disposable income decreases?

Households will choose to save more if

The term "crowding out" relates to the decrease in

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

The the expected profit, the greater is the .

If China's government runs a budget surplus and there is no Ricardo-Barro effect, there will be in the supply of loanable funds, private saving and investment .

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. Suppose that depreciation is 12 percent of GDP. investment in 2007 was billion.

An increase in the real interest rate the quantity of loanable funds supplied and the quantity of loanable funds demanded.

This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is and its net investment is .

Suppose the market for loanable funds is in equilibrium. If disposable income increases, the equilibrium real interest rate and the quantity of loanable funds .

-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF₀. What happens if disposable income decreases?