Question 1

Government monetary authorities manipulate the supply of money in the economy primarily to

Accepted Answer

A) ensure high profits for commercial banks. 
B) provide sufficient currency to individuals and businesses to conduct their daily business. 
C) keep the dollar strong measured against the currencies of foreign nations. 
D) influence the interest rate and the levels of investment, output, and prices in the economy. 
A) ensure high profits for commercial banks. 
B) provide sufficient currency to individuals and businesses to conduct their daily business. 
C) keep the dollar strong measured against the currencies of foreign nations. 
D) influence the interest rate and the levels of investment, output, and prices in the economy.

Question 2

Refer to the market for loanable funds, as shown in the graph. Suppose the market for loanable funds is originally in equilibrium at interest rate i ₀ and quantity Q ₀ . In the next period, the equilibrium interest rate increases to i ₁ and quantity decreases to Q ₁. Which of the following could be the cause of this shift?

Accepted Answer

A) Households decide to save less. 
B) Households decide to save more. 
C) Investors become less optimistic. 
D) Investors become more optimistic. 
A) Households decide to save less. 
B) Households decide to save more. 
C) Investors become less optimistic. 
D) Investors become more optimistic.

Question 3

Which of the following interest rates is usually the highest?

Accepted Answer

A) 30-year mortgage rate 
B) 20-year Treasury bond rate 
C) consumer credit-card rate 
D) prime rate of banks 
A) 30-year mortgage rate 
B) 20-year Treasury bond rate 
C) consumer credit-card rate 
D) prime rate of banks

Question 4

A lower equilibrium interest rate

Accepted Answer

A) increases saving, reduces total spending, and increases total output. 
B) decreases saving, increases total spending, and decreases total output. 
C) increases investment, increases total spending, and increases total output. 
D) decreases investment, decreases total spending, and increases total output. 
A) increases saving, reduces total spending, and increases total output. 
B) decreases saving, increases total spending, and decreases total output. 
C) increases investment, increases total spending, and increases total output. 
D) decreases investment, decreases total spending, and increases total output.

Question 5

The free-land era of U.S. history reflected a situation in which the quantity of land available at a zero price exceeded the quantity of land demanded.

Accepted Answer

A) True 
 B)False

Question 6

Money is an economic resource referred to as capital.

Accepted Answer

A) True 
 B)False

Question 7

If you pay $10,625 annually on a $125,000 loan and the rate of inflation is 3 percent, then the

Accepted Answer

A) real rate of interest is 4.5 percent. 
B) nominal rate of interest is 8.5 percent. 
C) real rate of interest is 6.5 percent. 
D) nominal rate of interest is 11.5 percent. 
A) real rate of interest is 4.5 percent. 
B) nominal rate of interest is 8.5 percent. 
C) real rate of interest is 6.5 percent. 
D) nominal rate of interest is 11.5 percent.

Question 8

Suppose you borrow $500 and agree to pay this $500 plus $75 of interest at the end of a year. The interest rate is

Accepted Answer

A) 10 percent. 
B) 15.0 percent. 
C) 12.50 percent. 
D) 7.50 percent. 
A) 10 percent. 
B) 15.0 percent. 
C) 12.50 percent. 
D) 7.50 percent.

Question 9

Suppose you borrow $500 and agree to pay this $500 plus $75 of interest at the end of a year. The interest rate is

Accepted Answer

A) 10 percent. 
B) 15.0 percent. 
C) 12.5 percent. 
D) 7.5 percent. 
A) 10 percent. 
B) 15.0 percent. 
C) 12.5 percent. 
D) 7.5 percent.

Question 10

Distinguish between the nominal rate of interest and real rate of interest.

Accepted Answer

The nominal interest rate is the interes

Question 11

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 value for cell D

Accepted Answer

A) cannot be determined. 
B) is $662.00. 
C) is $242.00. 
D) is $420.00. 
A) cannot be determined. 
B) is $662.00. 
C) is $242.00. 
D) is $420.00.

Question 12

A decrease in the supply of loanable funds and an increase in the demand for loanable funds will

Accepted Answer

A) increase the interest rate and the quantity of funds loaned. 
B) decrease the interest rate and the quantity of funds loaned. 
C) increase the interest rate, but the quantity of funds loaned may either increase or decrease. 
D) decrease the interest rate, but the quantity of funds loaned may either increase or decrease. 
A) increase the interest rate and the quantity of funds loaned. 
B) decrease the interest rate and the quantity of funds loaned. 
C) increase the interest rate, but the quantity of funds loaned may either increase or decrease. 
D) decrease the interest rate, but the quantity of funds loaned may either increase or decrease.

Question 13

Which of the following statements is correct?

Accepted Answer

A) Economic profits can properly be regarded as the salaries received by the hired managers of corporations. 
B) Economic rent is a price paid for productive land resources whose supply is perfectly inelastic. 
C) Economic profits would be nonexistent in a dynamic, purely competitive economy. 
D) Economic, or pure, profit is the minimum return that entrepreneurs must receive to continue in a particular line of production. 
A) Economic profits can properly be regarded as the salaries received by the hired managers of corporations. 
B) Economic rent is a price paid for productive land resources whose supply is perfectly inelastic. 
C) Economic profits would be nonexistent in a dynamic, purely competitive economy. 
D) Economic, or pure, profit is the minimum return that entrepreneurs must receive to continue in a particular line of production.

Question 14

The basic function of profits and losses is to allocate society's scarce resources to their highest valued uses.

Accepted Answer

A) True 
 B)False

Question 15

Unlike most demand curves, the demand curve for loanable funds is upsloping.

Accepted Answer

A) True 
 B)False

Question 16

If labor's share of the income paid to American resource suppliers is broadly defined as the sum of wages and salaries and proprietors' income, we can say that labor's relative share has

Accepted Answer

A) remained approximately constant since 1900. 
B) increased dramatically at the expense of capitalist income. 
C) declined by about one-third since 1900. 
D) decreased because of the decline of unionism. 
A) remained approximately constant since 1900. 
B) increased dramatically at the expense of capitalist income. 
C) declined by about one-third since 1900. 
D) decreased because of the decline of unionism.

Question 17

Refer to the demand schedule and possible supply schedules, A-D. Suppose that price influences the availability of the economic resource, and the equilibrium price is $2. Which resource supply schedule would apply in this case?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 18

Entrepreneurs can generate economic profits by all of the following, except

Accepted Answer

A) developing popular new products. 
B) reducing production costs below rivals' costs. 
C) creating and maintaining monopoly power. 
D) laying off workers in order to cut costs. 
A) developing popular new products. 
B) reducing production costs below rivals' costs. 
C) creating and maintaining monopoly power. 
D) laying off workers in order to cut costs.

Question 19

Economic profit might result from

Accepted Answer

A) easy entry into industries. 
B) dynamic change and uncertainty. 
C) X-inefficiency. 
D) a decline in entrepreneurship. 
A) easy entry into industries. 
B) dynamic change and uncertainty. 
C) X-inefficiency. 
D) a decline in entrepreneurship.

Question 20

Refer to the market for loanable funds, as shown in the graph. Suppose investors who borrow money in the loanable funds market become nervous and pessimistic about the economy in general, and expected returns on investments in particular. We would expect to see a(n)

Accepted Answer

A) lower equilibrium interest rate. 
B) rightward shift of the supply curve. 
C) rightward shift of the demand curve. 
D) increase in the equilibrium quantity of loanable funds. 
A) lower equilibrium interest rate. 
B) rightward shift of the supply curve. 
C) rightward shift of the demand curve. 
D) increase in the equilibrium quantity of loanable funds.

Exam 18: Rent, Interest, and Profit

Government monetary authorities manipulate the supply of money in the economy primarily to

Which of the following interest rates is usually the highest?

A lower equilibrium interest rate

The free-land era of U.S. history reflected a situation in which the quantity of land available at a zero price exceeded the quantity of land demanded.

Money is an economic resource referred to as capital.

If you pay $10,625 annually on a $125,000 loan and the rate of inflation is 3 percent, then the

Suppose you borrow $500 and agree to pay this $500 plus $75 of interest at the end of a year. The interest rate is

Suppose you borrow $500 and agree to pay this $500 plus $75 of interest at the end of a year. The interest rate is

Distinguish between the nominal rate of interest and real rate of interest.

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 value for cell D

A decrease in the supply of loanable funds and an increase in the demand for loanable funds will

Which of the following statements is correct?

The basic function of profits and losses is to allocate society's scarce resources to their highest valued uses.

Unlike most demand curves, the demand curve for loanable funds is upsloping.

If labor's share of the income paid to American resource suppliers is broadly defined as the sum of wages and salaries and proprietors' income, we can say that labor's relative share has

Refer to the demand schedule and possible supply schedules, A-D. Suppose that price influences the availability of the economic resource, and the equilibrium price is $2. Which resource supply schedule would apply in this case?

Entrepreneurs can generate economic profits by all of the following, except

Economic profit might result from

Refer to the market for loanable funds, as shown in the graph. Suppose investors who borrow money in the loanable funds market become nervous and pessimistic about the economy in general, and expected returns on investments in particular. We would expect to see a(n)

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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