Exam 7: Finance, Saving, and Investment

-In the above figure, the initial supply of loanable funds curve is SLF₀ and the initial demand for loanable funds curve is DLF₀. An economic expansion that raises disposable income and the expected profit would

The crowding-out effect refers to

A rise in the real interest rate

A firm's decision to invest in a project is based on the

The expected profit from an investment will change with

How does the real interest affect households' decisions about saving?

-The table above shows the loanable funds supply and demand schedules. a) What is the equilibrium real interest rate and the equilibrium quantity of loanable funds? b) If the real interest rate is 4 percent, is there a shortage or surplus? What will happen in the market?

"When there is a shortage of loanable funds, the real interest rate will increase." Explain whether the previous statement is correct or not.

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

If households expect an increase in their future incomes, they will save

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

The demand for loanable funds curve shows that as the ________ interest rate increases, there will be ________ the curve.

In 2007, the interest rate banks in France charge each other for loans was 4.86 percent. The inflation rate in France in 2007 was 2.8 percent. The real interest rate in France is

Which of the following items are considered physical capital? I. shares of Ford stock traded on the New York Stock Exchange II. the Taco Bell store nearest you III. the rental cars owned by Hertz Rental-A-Car IV. the salaries paid to Intel executives

In the absence of the Ricardo-Barro effect, an increase in the government deficit results in a ________ real interest rate and a ________ equilibrium quantity of investment.

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

When the inflation rate is zero, the

-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 rises, the amount of loanable funds demanded will be

An increase in the ________ is an example of a capital gain.

Suppose the market for loanable funds is in equilibrium. If the expected profit falls, the equilibrium real interest rate ________ and the quantity of loanable funds ________.