Question 1

Briefly explain the loanable funds theory of interest rate determination.

Accepted Answer

The loanable funds theory of interest ra

Question 2

Which of the following will increase the supply of loanable funds? An increase in the

Accepted Answer

A) rates of return on potential investments. 
B) productivity of business firms. 
C) demand for business products. 
D) savings of households. 
A) rates of return on potential investments. 
B) productivity of business firms. 
C) demand for business products. 
D) savings of households.

Question 3

Refer to the table representing Darcy's bank account. If she deposited $1,000 into her account at the beginning of year 1 and made no further deposits or withdrawals, the $1,191 value at the end of year 3 represents the

Accepted Answer

A) discounted value of the $1,000 deposit made at the beginning of year 1. 
B) present value of the $1,000 deposit made at the beginning of year 1. 
C) future value of the $1,000 deposit made at the beginning of year 1. 
D) present value of the interest earned over the three-year period. 
A) discounted value of the $1,000 deposit made at the beginning of year 1. 
B) present value of the $1,000 deposit made at the beginning of year 1. 
C) future value of the $1,000 deposit made at the beginning of year 1. 
D) present value of the interest earned over the three-year period.

Question 4

Which of the following resources is a "free and nonreproducible gift of nature"?

Accepted Answer

A) labor 
B) entrepreneurship 
C) capital 
D) land 
A) labor 
B) entrepreneurship 
C) capital 
D) land

Question 5

Which of the following was not a belief of Henry George and the single-tax movement?

Accepted Answer

A) Rental income is unfair because landlords do not really earn it from any productive effort. 
B) Rental income should be taxed heavily and should be the primary source of revenues for the government. 
C) Taxing rental income would adversely affect allocative efficiency because the tax would change how landlords use their land. 
D) The single tax on rent would not adversely affect society's productive efficiency. 
A) Rental income is unfair because landlords do not really earn it from any productive effort. 
B) Rental income should be taxed heavily and should be the primary source of revenues for the government. 
C) Taxing rental income would adversely affect allocative efficiency because the tax would change how landlords use their land. 
D) The single tax on rent would not adversely affect society's productive efficiency.

Question 6

Refer to the table representing Kara's bank account. If the $2,000 was deposited into her account at the beginning of year 1 and no further deposits or withdrawals were made, the interest rate Kara is receiving on her account

Accepted Answer

A) cannot be determined. 
B) is 10.00 percent. 
C) is 5.00 percent. 
D) is 20.00 percent. 
A) cannot be determined. 
B) is 10.00 percent. 
C) is 5.00 percent. 
D) is 20.00 percent.

Question 7

Interest is the

Accepted Answer

A) price paid for the use of money. 
B) opportunity cost of time. 
C) expectation of a future return on investment. 
D) reward for consuming rather than saving. 
A) price paid for the use of money. 
B) opportunity cost of time. 
C) expectation of a future return on investment. 
D) reward for consuming rather than saving.

Question 8

The "future value" of a sum of money refers to

Accepted Answer

A) the estimated value of that money invested in a stock portfolio at some future date. 
B) the purchasing power of a given amount of money adjusted for price changes. 
C) today's value of a sum of money to be received in the future. 
D) the amount to which some current sum of money will grow over time. 
A) the estimated value of that money invested in a stock portfolio at some future date. 
B) the purchasing power of a given amount of money adjusted for price changes. 
C) today's value of a sum of money to be received in the future. 
D) the amount to which some current sum of money will grow over time.

Question 9

The share of total income for "capitalists" in America (in the form of rent, interest, and profits)has been about

Accepted Answer

A) 20 percent. 
B) 40 percent. 
C) 50 percent. 
D) 75 percent. 
A) 20 percent. 
B) 40 percent. 
C) 50 percent. 
D) 75 percent.

Question 10

If people became thriftier and saved more, the loanable funds theory predicts that the equilibrium interest rate would decrease.

Accepted Answer

A) True 
 B)False

Question 11

What explains differences in the economic rent charged for two plots of 500 acres of land that are used for growing corn and located in the same county of a state?

Accepted Answer

Land varies widely in terms of productiv

Question 12

A decrease in the supply of loanable funds would tend to lower the interest rate.

Accepted Answer

A) True 
 B)False

Question 13

There will be pressure on the interest rate for loanable funds to increase when

Accepted Answer

A) supply increases. 
B) demand decreases. 
C) quantity supplied exceeds quantity demanded. 
D) quantity demanded exceeds the quantity supplied. 
A) supply increases. 
B) demand decreases. 
C) quantity supplied exceeds quantity demanded. 
D) quantity demanded exceeds the quantity supplied.

Question 14

Rent performs an incentive function, but no rationing function.

Accepted Answer

A) True 
 B)False

Question 15

Refer to the table representing Kara's bank account. If the $2,000 was deposited into her account at the beginning of year 1, the value for cell A is

Accepted Answer

A) $10. 
B) $200. 
C) $20. 
D) $100.00 
A) $10. 
B) $200. 
C) $20. 
D) $100.00

Question 16

A unique characteristic of taxes on economic rents is that such taxes

Accepted Answer

A) stimulate aggregate production. 
B) do not lead to a reallocation of the resource. 
C) are paid by consumers. 
D) are always regressive. 
A) stimulate aggregate production. 
B) do not lead to a reallocation of the resource. 
C) are paid by consumers. 
D) are always regressive.

Question 17

The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years from now.

Accepted Answer

A) True 
 B)False

Question 18

Describe how the income shares of national income are distributed to "labor" and to "capitalists." How has this distribution changed since 1900?

Accepted Answer

Even with labor income narrowly defined

Question 19

Effective usury laws

Accepted Answer

A) subsidize lenders. 
B) penalize those who borrow at the below-market interest rate. 
C) improve efficiency in investing. 
D) keep some low-income people from obtaining credit and loans. 
A) subsidize lenders. 
B) penalize those who borrow at the below-market interest rate. 
C) improve efficiency in investing. 
D) keep some low-income people from obtaining credit and loans.

Question 20

What is the difference between insurable and uninsurable risk?

Accepted Answer

Insurable risks are risks for which it i

Exam 18: Rent, Interest, and Profit

Briefly explain the loanable funds theory of interest rate determination.

Which of the following will increase the supply of loanable funds? An increase in the

Refer to the table representing Darcy's bank account. If she deposited $1,000 into her account at the beginning of year 1 and made no further deposits or withdrawals, the $1,191 value at the end of year 3 represents the

Which of the following resources is a "free and nonreproducible gift of nature"?

Which of the following was not a belief of Henry George and the single-tax movement?

Refer to the table representing Kara's bank account. If the $2,000 was deposited into her account at the beginning of year 1 and no further deposits or withdrawals were made, the interest rate Kara is receiving on her account

Interest is the

The "future value" of a sum of money refers to

The share of total income for "capitalists" in America (in the form of rent, interest, and profits)has been about

If people became thriftier and saved more, the loanable funds theory predicts that the equilibrium interest rate would decrease.

What explains differences in the economic rent charged for two plots of 500 acres of land that are used for growing corn and located in the same county of a state?

A decrease in the supply of loanable funds would tend to lower the interest rate.

There will be pressure on the interest rate for loanable funds to increase when

Rent performs an incentive function, but no rationing function.

Refer to the table representing Kara's bank account. If the $2,000 was deposited into her account at the beginning of year 1, the value for cell A is

A unique characteristic of taxes on economic rents is that such taxes

The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years from now.

Describe how the income shares of national income are distributed to "labor" and to "capitalists." How has this distribution changed since 1900?

Effective usury laws

What is the difference between insurable and uninsurable risk?

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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