Question 1

Refer to the table, in which the values for columns (2)through (5)are in acres. If the relevant columns are (1), (2), and (3), land rent will be

Accepted Answer

A) $100 per acre. 
B) $200 per acre. 
C) $300 per acre. 
D) $400 per acre. 
A) $100 per acre. 
B) $200 per acre. 
C) $300 per acre. 
D) $400 per acre.

Question 2

In general, if we compare two loans or bonds with the same loan size and taxability of interest-income, we would expect a higher interest rate on the loan or bond with a

Accepted Answer

A) higher risk and longer maturity. 
B) lower risk and longer maturity. 
C) lower risk and shorter maturity. 
D) higher risk and shorter maturity. 
A) higher risk and longer maturity. 
B) lower risk and longer maturity. 
C) lower risk and shorter maturity. 
D) higher risk and shorter maturity.

Question 3

Interest rates of various loans vary over a wide range due to differences in all of the following, except

Accepted Answer

A) borrower characteristics. 
B) maturity of the loan. 
C) loan size. 
D) lender characteristics. 
A) borrower characteristics. 
B) maturity of the loan. 
C) loan size. 
D) lender characteristics.

Question 4

Suppose many businesses want to increase their stock of capital goods and decide to borrow funds to do it. Which would be the likely result of this event?

Accepted Answer

A) Interest rates would increase. 
B) Interest rates would decrease. 
C) The equilibrium quantity of loanable funds would decrease. 
D) The equilibrium quantity of loanable funds would remain unchanged. 
A) Interest rates would increase. 
B) Interest rates would decrease. 
C) The equilibrium quantity of loanable funds would decrease. 
D) The equilibrium quantity of loanable funds would remain unchanged.

Question 5

Refer to the table representing Darcy's bank account. If she deposited the $1,000 into her account at the beginning of year 1 and made no further deposits or withdrawals, what interest rate is being paid on Darcy's account?

Accepted Answer

A) 6.40 percent 
B) 6 percent 
C) 19.10 percent 
D) 60 percent 
A) 6.40 percent 
B) 6 percent 
C) 19.10 percent 
D) 60 percent

Question 6

A bank charges one borrower (A)8 percent interest per year and another borrower (B)10 percent interest per year. Which of the following is a plausible reason for the higher interest rate for B?

Accepted Answer

A) A is borrowing the money for a longer period than B. 
B) A is borrowing a larger amount than B. 
C) B is using the money for a less risky project than A. 
D) B has a better credit rating than A. 
A) A is borrowing the money for a longer period than B. 
B) A is borrowing a larger amount than B. 
C) B is using the money for a less risky project than A. 
D) B has a better credit rating than A.

Question 7

The payment earned for taking uninsurable risks in owning and running a business is called profit.

Accepted Answer

A) True 
 B)False

Question 8

The table gives investment-demand in an economy. Assume that investment demand decreased by $100 billion in the investment-demand schedule. What expected rate of return and interest rate would create $430 billion of investment?

Accepted Answer

A) 13 percent 
B) 15 percent 
C) 17 percent 
D) 19 percent 
A) 13 percent 
B) 15 percent 
C) 17 percent 
D) 19 percent

Question 9

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, what is the value for cell D?

Accepted Answer

A) $67.40 
B) $180 
C) $191 
D) It cannot be determined. 
A) $67.40 
B) $180 
C) $191 
D) It cannot be determined.

Question 10

Which factor will increase the demand for loanable funds?

Accepted Answer

A) a change in the tax law to exempt savings from taxation 
B) expansion of social insurance to cover more fully the cost of retirement 
C) a general business recession that produces high rates of unemployment 
D) a technological advance that increases returns on investments 
A) a change in the tax law to exempt savings from taxation 
B) expansion of social insurance to cover more fully the cost of retirement 
C) a general business recession that produces high rates of unemployment 
D) a technological advance that increases returns on investments

Question 11

Which of the following statements is correct?

Accepted Answer

A) Rent performs an incentive function, but not a rationing function. 
B) Wage rate does not perform an incentive function in the supply of labor. 
C) Profits are payments to capital resource owners. 
D) Demand is the "active," and supply the "passive," determinant of land rent. 
A) Rent performs an incentive function, but not a rationing function. 
B) Wage rate does not perform an incentive function in the supply of labor. 
C) Profits are payments to capital resource owners. 
D) Demand is the "active," and supply the "passive," determinant of land rent.

Question 12

Refer to the diagram. If the supply of loanable funds is S ₁ and the demand for loanable funds is D ₁, the equilibrium interest rate and quantity of funds borrowed will be

Accepted Answer

A) G and A. 
B) F and A. 
C) F and C. 
D) E and A. 
A) G and A. 
B) F and A. 
C) F and C. 
D) E and A.

Question 13

"Present value" refers to the

Accepted Answer

A) value today of a specific amount of money to be received in the future. 
B) current value of money held in a bank account. 
C) amount to which some current amount of money will grow over time. 
D) interest rate specified when a loan contract is signed. 
A) value today of a specific amount of money to be received in the future. 
B) current value of money held in a bank account. 
C) amount to which some current amount of money will grow over time. 
D) interest rate specified when a loan contract is signed.

Question 14

The characteristic that makes economic rent distinct from wages, interest, and profit is that it is

Accepted Answer

A) payment for a resource that is completely fixed in total supply. 
B) always expressed in dollars, never in percent. 
C) fixed by annual or monthly contracts. 
D) makes the supply of the resource increase if its rent rises. 
A) payment for a resource that is completely fixed in total supply. 
B) always expressed in dollars, never in percent. 
C) fixed by annual or monthly contracts. 
D) makes the supply of the resource increase if its rent rises.

Question 15

Which type of income contributes the smallest share to total income in the U.S.?

Accepted Answer

A) wages 
B) interest 
C) rent 
D) profits 
A) wages 
B) interest 
C) rent 
D) profits

Question 16

For a usury law to be effective, the interest rate must be

Accepted Answer

A) determined by borrowing and lending. 
B) set at the market equilibrium interest rate. 
C) set above the market equilibrium interest rate. 
D) set below the market equilibrium interest rate. 
A) determined by borrowing and lending. 
B) set at the market equilibrium interest rate. 
C) set above the market equilibrium interest rate. 
D) set below the market equilibrium interest rate.

Question 17

Refer to the demand schedule and possible supply schedules, A-D. Suppose that the supply of a resource is given by the schedule that exhibits a zero price elasticity. If demand for the resource increases from the original demand schedule by 20 units at each price, then the equilibrium economic rent would be

Accepted Answer

A) $4. 
B) $3. 
C) $2. 
D) $1. 
A) $4. 
B) $3. 
C) $2. 
D) $1.

Question 18

The total supply of land is

Accepted Answer

A) upsloping. 
B) perfectly elastic. 
C) perfectly inelastic. 
D) greater in the short run than in the long run. 
A) upsloping. 
B) perfectly elastic. 
C) perfectly inelastic. 
D) greater in the short run than in the long run.

Question 19

A firm will undertake investments as long as the expected rate of return is less than the interest rate.

Accepted Answer

A) True 
 B)False

Question 20

Other things equal, the shorter the loan period and the larger the loan size, the higher is the interest rate charged by the lender.

Accepted Answer

A) True 
 B)False

Exam 18: Rent, Interest, and Profit

Refer to the table, in which the values for columns (2)through (5)are in acres. If the relevant columns are (1), (2), and (3), land rent will be

In general, if we compare two loans or bonds with the same loan size and taxability of interest-income, we would expect a higher interest rate on the loan or bond with a

Interest rates of various loans vary over a wide range due to differences in all of the following, except

Suppose many businesses want to increase their stock of capital goods and decide to borrow funds to do it. Which would be the likely result of this event?

Refer to the table representing Darcy's bank account. If she deposited the $1,000 into her account at the beginning of year 1 and made no further deposits or withdrawals, what interest rate is being paid on Darcy's account?

A bank charges one borrower (A)8 percent interest per year and another borrower (B)10 percent interest per year. Which of the following is a plausible reason for the higher interest rate for B?

The payment earned for taking uninsurable risks in owning and running a business is called profit.

The table gives investment-demand in an economy. Assume that investment demand decreased by $100 billion in the investment-demand schedule. What expected rate of return and interest rate would create $430 billion of investment?

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, what is the value for cell D?

Which factor will increase the demand for loanable funds?

Which of the following statements is correct?

Refer to the diagram. If the supply of loanable funds is S ₁ and the demand for loanable funds is D ₁, the equilibrium interest rate and quantity of funds borrowed will be

"Present value" refers to the

The characteristic that makes economic rent distinct from wages, interest, and profit is that it is

Which type of income contributes the smallest share to total income in the U.S.?

For a usury law to be effective, the interest rate must be

The total supply of land is

A firm will undertake investments as long as the expected rate of return is less than the interest rate.

Other things equal, the shorter the loan period and the larger the loan size, the higher is the interest rate charged by the lender.

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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