Question 1

If the interest rate is 5 percent, what is the future value of $5,000 three years from now?

Accepted Answer

A) $5,788 
B) $5,010 
C) $5,500 
D) $4,310 
A) $5,788 
B) $5,010 
C) $5,500 
D) $4,310

Question 2

Answer the question using the table. Figures are in billions of dollars. A usury law that sets the interest rate 2 percent below the market rate of interest will result in a shortage of funds of

Accepted Answer

A) $120 billion. 
B) $80 billion. 
C) $40 billion. 
D) $20 billion. 
A) $120 billion. 
B) $80 billion. 
C) $40 billion. 
D) $20 billion.

Question 3

Answer the question using the table. Figures are in billions of dollars. The equilibrium interest rate and quantity of loanable funds demanded and supplied in this market will be

Accepted Answer

A) 8 percent and $14 billion. 
B) 10 percent and $18 billion. 
C) 12 percent and $22 billion. 
D) 14 percent and $26 billion. 
A) 8 percent and $14 billion. 
B) 10 percent and $18 billion. 
C) 12 percent and $22 billion. 
D) 14 percent and $26 billion.

Question 4

Refer to the diagram. Land

Accepted Answer

A) will cease to be used in production if demand falls below D₄. 
B) would be a free resource if demand were D₄ or less. 
C) would be an economic (scarce)resource in the case of all four demand curves. 
D) would be a free resource in the case of all four demand curves. 
A) will cease to be used in production if demand falls below D₄. 
B) would be a free resource if demand were D₄ or less. 
C) would be an economic (scarce)resource in the case of all four demand curves. 
D) would be a free resource in the case of all four demand curves.

Question 5

What are the relationships among capital, interest rates, and interest income?

Accepted Answer

Businesses can either lease capital good

Question 6

Which of the following statements best illustrates the time-value of money concept?

Accepted Answer

A) Bob is willing to forgo receiving $100 today in order to receive $110 next month. 
B) Tom is indifferent between receiving $50 now and receiving $50 six months from now. 
C) Terry works for an hourly wage instead of a fixed salary. 
D) Jeff would prefer to receive $200 at the end of the year instead of $220 now. 
A) Bob is willing to forgo receiving $100 today in order to receive $110 next month. 
B) Tom is indifferent between receiving $50 now and receiving $50 six months from now. 
C) Terry works for an hourly wage instead of a fixed salary. 
D) Jeff would prefer to receive $200 at the end of the year instead of $220 now.

Question 7

Which of the following generalizations is false? Other things equal,

Accepted Answer

A) interest rates are higher if lenders are imperfectly, rather than purely, competitive. 
B) the interest rate is less on small loans than on larger loans. 
C) long-term loans normally command higher interest rates than short-term loans. 
D) the greater the risk on a loan, the greater the interest rate. 
A) interest rates are higher if lenders are imperfectly, rather than purely, competitive. 
B) the interest rate is less on small loans than on larger loans. 
C) long-term loans normally command higher interest rates than short-term loans. 
D) the greater the risk on a loan, the greater the interest rate.

Question 8

The "time-value of money" refers to the fact that

Accepted Answer

A) a given amount of money becomes more valuable over time. 
B) a given amount of money is more valuable the sooner it is obtained. 
C) people expect monetary compensation for their labor time. 
D) a given amount of money today is equivalent to a smaller amount of money in the future. 
A) a given amount of money becomes more valuable over time. 
B) a given amount of money is more valuable the sooner it is obtained. 
C) people expect monetary compensation for their labor time. 
D) a given amount of money today is equivalent to a smaller amount of money in the future.

Question 9

A firm wants to borrow funds to purchase a new piece of equipment that costs $20,000 and has a useful life of one year. The investment is expected to produce an additional $1,500 in total revenue. The firm will most likely make the investment if the interest rate is

Accepted Answer

A) 6 percent. 
B) 8 percent. 
C) 10 percent. 
D) 12 percent. 
A) 6 percent. 
B) 8 percent. 
C) 10 percent. 
D) 12 percent.

Question 10

Refer to the table representing Darcy's bank account. If she deposited $4,500 into her account at the beginning of year 1 and made no further deposits or withdrawals, what is the value for cell D?

Accepted Answer

A) $93.20 
B) $270 
C) $275 
D) It cannot be determined. 
A) $93.20 
B) $270 
C) $275 
D) It cannot be determined.

Question 11

To say that land rent performs no incentive function means that

Accepted Answer

A) higher rental payments will not bring forth a larger quantity of land. 
B) rent is not a cost to specific firms, but it is a cost from the standpoint of the economy as a whole. 
C) rent does not allocate land in terms of productive efficiency. 
D) rent tends to allocate land into the most productive uses. 
A) higher rental payments will not bring forth a larger quantity of land. 
B) rent is not a cost to specific firms, but it is a cost from the standpoint of the economy as a whole. 
C) rent does not allocate land in terms of productive efficiency. 
D) rent tends to allocate land into the most productive uses.

Question 12

The demand curve for loanable funds illustrates the behavior of lenders or savers.

Accepted Answer

A) True 
 B)False

Question 13

What is the pure rate of interest?

Accepted Answer

The pure rate of interest is a hypotheti

Question 14

The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received.

Accepted Answer

A) True 
 B)False

Question 15

Henry George's single-tax movement was based on the argument that

Accepted Answer

A) the tax structure should consist solely of a highly progressive tax on nonwage incomes. 
B) interest is unearned income and should be taxed away by government. 
C) in less-developed countries the supply of and demand for land will be such that land will be a free good and therefore capable of bearing sizable taxes. 
D) a high tax on land rent is justified because land rent performs no incentive function. 
A) the tax structure should consist solely of a highly progressive tax on nonwage incomes. 
B) interest is unearned income and should be taxed away by government. 
C) in less-developed countries the supply of and demand for land will be such that land will be a free good and therefore capable of bearing sizable taxes. 
D) a high tax on land rent is justified because land rent performs no incentive function.

Question 16

Which of the following is not a component of the demand for loanable funds?

Accepted Answer

A) household purchases of housing and durable consumer goods 
B) business purchases of capital goods 
C) government financing of the public debt 
D) household saving 
A) household purchases of housing and durable consumer goods 
B) business purchases of capital goods 
C) government financing of the public debt 
D) household saving

Question 17

As viewed by society, economic rent is not a cost but rather a surplus payment.

Accepted Answer

A) True 
 B)False

Question 18

An increase in the expected rates of return on investments would most likely increase the supply of loanable funds.

Accepted Answer

A) True 
 B)False

Question 19

The schedule shows various interest rates, the associated quantity demanded of loanable funds, and the quantity supplied of loanable funds in billions of dollars at those interest rates. At an interest rate of 4 percent, there will be

Accepted Answer

A) an excess supply of loanable funds of 140 billion. 
B) an excess supply of loanable funds of 360 billion. 
C) an excess demand for loanable funds of 140 billion. 
D) an excess demand for loanable funds of 500 billion. 
A) an excess supply of loanable funds of 140 billion. 
B) an excess supply of loanable funds of 360 billion. 
C) an excess demand for loanable funds of 140 billion. 
D) an excess demand for loanable funds of 500 billion.

Question 20

What are ways that lenders affect the effective rate of interest paid or received relative to what it appears to be?

Accepted Answer

Some lenders discount a loan at the time

Exam 18: Rent, Interest, and Profit

If the interest rate is 5 percent, what is the future value of $5,000 three years from now?

Answer the question using the table. Figures are in billions of dollars. A usury law that sets the interest rate 2 percent below the market rate of interest will result in a shortage of funds of

Answer the question using the table. Figures are in billions of dollars. The equilibrium interest rate and quantity of loanable funds demanded and supplied in this market will be

Refer to the diagram. Land

What are the relationships among capital, interest rates, and interest income?

Which of the following statements best illustrates the time-value of money concept?

Which of the following generalizations is false? Other things equal,

The "time-value of money" refers to the fact that

A firm wants to borrow funds to purchase a new piece of equipment that costs $20,000 and has a useful life of one year. The investment is expected to produce an additional $1,500 in total revenue. The firm will most likely make the investment if the interest rate is

Refer to the table representing Darcy's bank account. If she deposited $4,500 into her account at the beginning of year 1 and made no further deposits or withdrawals, what is the value for cell D?

To say that land rent performs no incentive function means that

The demand curve for loanable funds illustrates the behavior of lenders or savers.

What is the pure rate of interest?

The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received.

Henry George's single-tax movement was based on the argument that

Which of the following is not a component of the demand for loanable funds?

As viewed by society, economic rent is not a cost but rather a surplus payment.

An increase in the expected rates of return on investments would most likely increase the supply of loanable funds.

The schedule shows various interest rates, the associated quantity demanded of loanable funds, and the quantity supplied of loanable funds in billions of dollars at those interest rates. At an interest rate of 4 percent, there will be

What are ways that lenders affect the effective rate of interest paid or received relative to what it appears to be?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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