Question 1

The amount of money one must pay for the use of $1 for one year is called

Accepted Answer

A)  wage. 
B)  rent. 
C)  interest. 
D)  profit. 
E)  a loanable fund. 
A)  wage. 
B)  rent. 
C)  interest. 
D)  profit. 
E)  a loanable fund.

Question 2

If the desire for present consumption by individuals and households increases,the supply of loanable funds will

Accepted Answer

A)  shift to the right, causing the interest rate to rise. 
B)  shift to the right, causing the interest rate to fall. 
C)  shift to the left, causing the interest rate to fall. 
D)  shift to the left, causing the interest rate to rise. 
E)  be unaffected, but the demand for loanable funds will fall. 
A)  shift to the right, causing the interest rate to rise. 
B)  shift to the right, causing the interest rate to fall. 
C)  shift to the left, causing the interest rate to fall. 
D)  shift to the left, causing the interest rate to rise. 
E)  be unaffected, but the demand for loanable funds will fall.

Question 3

The rate of return for an asset that costs $200,000 and promises to pay $40,000 net per year forever to its owner is ________ percent.

Accepted Answer

A)  10 
B)  15 
C)  20 
D)  25 
E)  100 
A)  10 
B)  15 
C)  20 
D)  25 
E)  100

Question 4

If variations in the price of an input do not lead to changes in the amounts of the input available to the economy,the payment received by the input is referred to as

Accepted Answer

A)  profit. 
B)  interest. 
C)  capital. 
D)  compensation. 
E)  rent. 
A)  profit. 
B)  interest. 
C)  capital. 
D)  compensation. 
E)  rent.

Question 5

If the interest rate remains constant,the present value of a dollar

Accepted Answer

A)  declines as the length of time increases before the dollar is received. 
B)  is unaffected by the length of time before the dollar is received. 
C)  rises as the length of time increases before the dollar is received. 
D)  is calculated by dividing the interest rate by one, raised to the power of the number of years in the future the money will be received. 
E)  is calculated by multiplying the interest rate per dollar by the number of dollars to be received. 
A)  declines as the length of time increases before the dollar is received. 
B)  is unaffected by the length of time before the dollar is received. 
C)  rises as the length of time increases before the dollar is received. 
D)  is calculated by dividing the interest rate by one, raised to the power of the number of years in the future the money will be received. 
E)  is calculated by multiplying the interest rate per dollar by the number of dollars to be received.

Question 6

If the Federal Reserve pursues a policy of easy money,the supply of loanable funds will

Accepted Answer

A)  shift to the right, causing the interest rate to fall. 
B)  shift to the right, causing the interest rate to rise. 
C) be unaffected, but the demand for loanable funds will shift to the right. 
D)  shift to the left, causing the interest rate to rise. 
E)  shift to the left, causing the interest rate to fall. 
A)  shift to the right, causing the interest rate to fall. 
B)  shift to the right, causing the interest rate to rise. 
C) be unaffected, but the demand for loanable funds will shift to the right. 
D)  shift to the left, causing the interest rate to rise. 
E)  shift to the left, causing the interest rate to fall.

Question 7

The process of computing an asset's worth is called

Accepted Answer

A)  computing an asset's rate of return. 
B)  appropriation. 
C)  calibration. 
D)  investment. 
E)  capitalization. 
A)  computing an asset's rate of return. 
B)  appropriation. 
C)  calibration. 
D)  investment. 
E)  capitalization.

Question 8

Suppose I am to receive $24,000 two years from now.I need the money immediately and wish to sell the rights to the $24,000.If the interest rate is 12 percent,I can expect to receive

Accepted Answer

A)  $23,659. 
B)  $21,428. 
C)  $20,000. 
D)  $19,133. 
E)  $18,230. 
A)  $23,659. 
B)  $21,428. 
C)  $20,000. 
D)  $19,133. 
E)  $18,230.

Question 9

Rent,interest,and profit are forms of ________ income.

Accepted Answer

A)  bookkeeping 
B)  property 
C)  nonproductive 
D)  surplus 
E)  fixed 
A)  bookkeeping 
B)  property 
C)  nonproductive 
D)  surplus 
E)  fixed

Question 10

The distinction between the pure rate of interest and the actual interest rate is primarily a reflection of

Accepted Answer

A)  surplus value. 
B)  rent. 
C)  innovation. 
D)  riskiness. 
E)  intensity. 
A)  surplus value. 
B)  rent. 
C)  innovation. 
D)  riskiness. 
E)  intensity.

Question 11

The equilibrium rate of interest is

Accepted Answer

A)  determined by the demand and supply of loanable funds. 
B)  equivalent to the profit rate. 
C)  fixed by law in the United States. 
D)  the rate that ensures that households and businesses can borrow all they need. 
E)  equal to the value of a bond or a stock. 
A)  determined by the demand and supply of loanable funds. 
B)  equivalent to the profit rate. 
C)  fixed by law in the United States. 
D)  the rate that ensures that households and businesses can borrow all they need. 
E)  equal to the value of a bond or a stock.

Question 12

To Marx,profits were

Accepted Answer

A)  a reward for risk bearing. 
B)  a measure of capital's productive activity. 
C)  a social dividend arising from the capitalist's efficiency. 
D)  a measure of the surplus value created by capital. 
E)  that part of labor's productivity the capitalist retains. 
A)  a reward for risk bearing. 
B)  a measure of capital's productive activity. 
C)  a social dividend arising from the capitalist's efficiency. 
D)  a measure of the surplus value created by capital. 
E)  that part of labor's productivity the capitalist retains.

Question 13

An asset that earns a fixed sum of money each year for its owner will

Accepted Answer

A)  provide the same rate of return regardless of its cost. 
B)  provide its owner with a capitalized value equal to its annual payment. 
C)  have its present value capitalized each time the annual payment is received. 
D)  yield a lower rate of return when its price declines. 
E)  decline in price when the market rate of interest rises. 
A)  provide the same rate of return regardless of its cost. 
B)  provide its owner with a capitalized value equal to its annual payment. 
C)  have its present value capitalized each time the annual payment is received. 
D)  yield a lower rate of return when its price declines. 
E)  decline in price when the market rate of interest rises.

Question 14

Profits as a reward to innovation is a concept most associated with

Accepted Answer

A)  Karl Marx. 
B)  Henry George. 
C)  Frank Knight. 
D)  Thomas Malthus. 
E)  Joseph Schumpeter. 
A)  Karl Marx. 
B)  Henry George. 
C)  Frank Knight. 
D)  Thomas Malthus. 
E)  Joseph Schumpeter.

Question 15

If the pure rate of interest is 5 percent per year,a riskless asset that guarantees to pay the owner $2,000 per year forever is worth

Accepted Answer

A)  $10,000. 
B)  $20,000. 
C)  $30,000. 
D)  $40,000. 
E)  an infinite amount. 
A)  $10,000. 
B)  $20,000. 
C)  $30,000. 
D)  $40,000. 
E)  an infinite amount.

Question 16

The demand curve for loanable funds slopes downward to the right because

Accepted Answer

A)  there are more projects that are profitable at low than at high rates of interest. 
B)  firms borrow money only when interest rates are low. 
C)  an increase in the supply of loanable funds generally raises interest rates. 
D)  the lower the asset's rate of return, the higher the interest rate. 
E)  money is not as profitable when its price is high. 
A)  there are more projects that are profitable at low than at high rates of interest. 
B)  firms borrow money only when interest rates are low. 
C)  an increase in the supply of loanable funds generally raises interest rates. 
D)  the lower the asset's rate of return, the higher the interest rate. 
E)  money is not as profitable when its price is high.

Question 17

If $1,000 received a year from today is equivalent to $926 received today,the rate of interest is ________ percent.

Accepted Answer

A)  10 
B)  9.3 
C)  8 
D)  7.4 
E)  6 
A)  10 
B)  9.3 
C)  8 
D)  7.4 
E)  6

Question 18

The following question are based on the following schedule:
  
-A 3-percentage-point increase in the rate of interest prior to making the investment decision would reduce the amount invested by ________ million.

Accepted Answer

A)  $8 
B)  $9 
C)  $20 
D)  $22 
E)  $28 
A)  $8 
B)  $9 
C)  $20 
D)  $22 
E)  $28

Question 19

The following question are based on the following schedule:
  
-If the interest rate is 12 percent,the firm will invest ________ million.

Accepted Answer

A)  $8 
B)  $9 
C)  $20 
D)  $22 
E)  $28 
A)  $8 
B)  $9 
C)  $20 
D)  $22 
E)  $28

Question 20

-Which of the above diagrams,illustrating changes in demand,best demonstrates the concept of economic rent?

Accepted Answer

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

Exam 11: Interest,rent,and Profit

The amount of money one must pay for the use of $1 for one year is called

If the desire for present consumption by individuals and households increases,the supply of loanable funds will

The rate of return for an asset that costs $200,000 and promises to pay $40,000 net per year forever to its owner is ________ percent.

If variations in the price of an input do not lead to changes in the amounts of the input available to the economy,the payment received by the input is referred to as

If the interest rate remains constant,the present value of a dollar

If the Federal Reserve pursues a policy of easy money,the supply of loanable funds will

The process of computing an asset's worth is called

Suppose I am to receive $24,000 two years from now.I need the money immediately and wish to sell the rights to the $24,000.If the interest rate is 12 percent,I can expect to receive

Rent,interest,and profit are forms of ________ income.

The distinction between the pure rate of interest and the actual interest rate is primarily a reflection of

The equilibrium rate of interest is

To Marx,profits were

An asset that earns a fixed sum of money each year for its owner will

Profits as a reward to innovation is a concept most associated with

If the pure rate of interest is 5 percent per year,a riskless asset that guarantees to pay the owner $2,000 per year forever is worth

The demand curve for loanable funds slopes downward to the right because

If $1,000 received a year from today is equivalent to $926 received today,the rate of interest is ________ percent.

The following question are based on the following schedule: -A 3-percentage-point increase in the rate of interest prior to making the investment decision would reduce the amount invested by ________ million.

The following question are based on the following schedule: -If the interest rate is 12 percent,the firm will invest ________ million.

-Which of the above diagrams,illustrating changes in demand,best demonstrates the concept of economic rent?

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

Exchange Rates and the Balance of Payments

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