Question 1

When the real interest rate ________ the equilibrium real interest rate, there is a ________ of loanable funds and the real interest rate ________.

Accepted Answer

A)  exceeds; surplus ; falls 
B)  is less than; surplus; rises 
C)  exceeds; shortage; rises 
D)  is less than; shortage; falls 
E)  exceeds; surplus; rises 
A)  exceeds; surplus ; falls 
B)  is less than; surplus; rises 
C)  exceeds; shortage; rises 
D)  is less than; shortage; falls 
E)  exceeds; surplus; rises

Question 2

What is the distinction between gross investment and net investment?

Accepted Answer

Gross investment is the total spending o

Question 3

During 2009, a country's income was $6.0 trillion, its consumption was $5.5 trillion, and its wealth at the beginning of 2009 was $30.0 trillion.The country's wealth at the end of 2009 was

Accepted Answer

A)  $30.0 trillion. 
B)  $30.5 trillion. 
C)  $35.5 trillion. 
D)  $36.0 trillion. 
E)  $6.0 trillion. 
A)  $30.0 trillion. 
B)  $30.5 trillion. 
C)  $35.5 trillion. 
D)  $36.0 trillion. 
E)  $6.0 trillion.

Question 4

The demand for loanable funds curve shows the relationship between the quantity of loanable funds demanded and

Accepted Answer

A)  the real interest rate. 
B)  the price level. 
C)  the capital stock. 
D)  depreciation. 
E)  the expected rate of profit. 
A)  the real interest rate. 
B)  the price level. 
C)  the capital stock. 
D)  depreciation. 
E)  the expected rate of profit.

Question 5

Does a change in the real interest rate shift the supply of loanable funds curve?
 Explain your answer.

Accepted Answer

A change in the real interest rate does

Question 6

A decrease in people's disposable income

Accepted Answer

A)  increases saving. 
B)  increases consumption. 
C)  decreases saving. 
D)  increases saving and decrease consumption. 
E)  increases investment demand. 
A)  increases saving. 
B)  increases consumption. 
C)  decreases saving. 
D)  increases saving and decrease consumption. 
E)  increases investment demand.

Question 7

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Real interest rate } \
\text { (percent per year) }
\end{array} & \begin{array} { c } 
\text { Demand for loanable funds Supply of loanable funds } \
\text { (billions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { (billions of } \
\text { 2005 dollars) }
\end{array} \
\hline 3 & 750 & 450 \
4 & 700 & 500 \
5 & 650 & 550 \
6 & 600 & 600 \
7 & 550 & 650 \
8 & 500 & 700 \
9 & 450 & 750
\end{array}$$
-The above table has the private demand for loanable funds and the private supply of loanable funds schedules.If the government budget surplus is $200 billion, and there is a Ricardo-Barro effect, the equilibrium real interest rate is ________ and the equilibrium quantity of loanable funds is ________.

Accepted Answer

A)  6 percent; $600 billion 
B)  4 percent; $700 billion 
C)  8 percent, $500 billion 
D)  8 percent; $700 billion 
E)  4 percent; $500 billion 
A)  6 percent; $600 billion 
B)  4 percent; $700 billion 
C)  8 percent, $500 billion 
D)  8 percent; $700 billion 
E)  4 percent; $500 billion

Question 8

Economists use the term "financial markets" to mean the markets in which

Accepted Answer

A)  firms purchase their physical capital. 
B)  firms supply their goods and services. 
C)  households supply their labor services. 
D)  firms get the funds that they use to buy physical capital. 
E)  the government borrows to fund any budget surplus. 
A)  firms purchase their physical capital. 
B)  firms supply their goods and services. 
C)  households supply their labor services. 
D)  firms get the funds that they use to buy physical capital. 
E)  the government borrows to fund any budget surplus.

Question 9

If wealth ________, then saving increases, which is shown by a ________.

Accepted Answer

A)  increases; movement upward along the supply of loanable funds curve 
B)  decreases; a movement downward along the supply of loanable funds curve 
C)  increases; rightward shift of the supply of loanable funds curve 
D)  decreases; rightward shift of the supply of loanable funds curve 
E)  increases; leftward shift of the supply of loanable funds curve 
A)  increases; movement upward along the supply of loanable funds curve 
B)  decreases; a movement downward along the supply of loanable funds curve 
C)  increases; rightward shift of the supply of loanable funds curve 
D)  decreases; rightward shift of the supply of loanable funds curve 
E)  increases; leftward shift of the supply of loanable funds curve

Question 10

-In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve.If there is no Ricardo-Barro effect, the figure shows a situation in which the government has a budget

Accepted Answer

A)  surplus of $2 trillion. 
B)  deficit of $2 trillion. 
C)  surplus of $14 trillion. 
D)  deficit of $11 trillion. 
E)  surplus of $12 trillion. 
A)  surplus of $2 trillion. 
B)  deficit of $2 trillion. 
C)  surplus of $14 trillion. 
D)  deficit of $11 trillion. 
E)  surplus of $12 trillion.

Question 11

If there is no Ricardo-Barro effect, an increase in the government budget surplus will

Accepted Answer

A)  decrease the supply of loanable funds. 
B)  raise the real interest rate. 
C)  lower the real interest rate. 
D)  decrease the demand for loanable funds. 
E)  not change the demand for loanable funds, the supply of loanable funds, or the real interest rate. 
A)  decrease the supply of loanable funds. 
B)  raise the real interest rate. 
C)  lower the real interest rate. 
D)  decrease the demand for loanable funds. 
E)  not change the demand for loanable funds, the supply of loanable funds, or the real interest rate.

Question 12

The crowding-out effect describes how a government budget ________ ________ the real interest rate and thereby ________ equilibrium investment.

Accepted Answer

A)  deficit; raises; decreases 
B)  deficit; lowers; increases 
C)  surplus; raises; decreases 
D)  surplus; lowers; decreases 
E)  deficit; lowers; decreases 
A)  deficit; raises; decreases 
B)  deficit; lowers; increases 
C)  surplus; raises; decreases 
D)  surplus; lowers; decreases 
E)  deficit; lowers; decreases

Question 13

The "crowding-out effect" refers to how a government budget deficit

Accepted Answer

A)  shifts only the supply of loanable funds curve leftward. 
B)  shifts only the demand for loanable funds curve leftward. 
C)  shifts both the demand for and the supply of loanable funds curves leftward. 
D)  decreases the equilibrium quantity of investment. 
E)  increases the equilibrium quantity of investment. 
A)  shifts only the supply of loanable funds curve leftward. 
B)  shifts only the demand for loanable funds curve leftward. 
C)  shifts both the demand for and the supply of loanable funds curves leftward. 
D)  decreases the equilibrium quantity of investment. 
E)  increases the equilibrium quantity of investment.

Question 14

A bond's price is $80 and the bond pays $8 in interest every year.The bond's interest rate is ________.

Accepted Answer

A)  8 percent 
B)  10 percent 
C)  4 percent 
D)  80 percent 
E)  None of the above are correct. 
A)  8 percent 
B)  10 percent 
C)  4 percent 
D)  80 percent 
E)  None of the above are correct.

Question 15

If the real interest rate falls, other things being the same, the quantity of loanable funds demanded ________ and the quantity of loanable funds supplied ________.

Accepted Answer

A)  increases; decreases 
B)  increases; increases 
C)  decreases; does not change 
D)  does not change; decreases 
E)  decreases; decreases 
A)  increases; decreases 
B)  increases; increases 
C)  decreases; does not change 
D)  does not change; decreases 
E)  decreases; decreases

Question 16

Suppose the government's budget deficit increases by $500 billion.If there is no Ricardo-Barro effect, what occurs?

Accepted Answer

A)  The demand for loanable funds curve shifts rightward, the real interest rate rises, and the quantity of loanable funds increases. 
B)  The supply of loanable funds curve shifts leftward, the real interest rate rises, and the quantity of loanable funds decreases. 
C)  The demand for loanable funds curve shifts leftward, the real interest rate falls, and the quantity of loanable funds decreases. 
D)  The supply of loanable funds curve shifts rightward, the real interest rate falls, and the quantity of loanable funds increases. 
E)  The supply of loanable funds curve shifts leftward, the real interest rate rises, and the quantity of loanable funds increases. 
A)  The demand for loanable funds curve shifts rightward, the real interest rate rises, and the quantity of loanable funds increases. 
B)  The supply of loanable funds curve shifts leftward, the real interest rate rises, and the quantity of loanable funds decreases. 
C)  The demand for loanable funds curve shifts leftward, the real interest rate falls, and the quantity of loanable funds decreases. 
D)  The supply of loanable funds curve shifts rightward, the real interest rate falls, and the quantity of loanable funds increases. 
E)  The supply of loanable funds curve shifts leftward, the real interest rate rises, and the quantity of loanable funds increases.

Question 17

What do Fannie Mae and Freddie Mac have in common?

Accepted Answer

A)  They are both government-sponsored mortgage lenders. 
B)  They are both investment banks. 
C)  They are both pension funds. 
D)  Both firms went out of business in the 2008 financial crisis. 
E)  Both firms issue bonds on behalf of the government. 
A)  They are both government-sponsored mortgage lenders. 
B)  They are both investment banks. 
C)  They are both pension funds. 
D)  Both firms went out of business in the 2008 financial crisis. 
E)  Both firms issue bonds on behalf of the government.

Question 18

-The figure above shows the loanable funds market.The equilibrium real interest rate is ________ and the equilibrium quantity of loanable funds is ________.

Accepted Answer

A)  6 percent; $2.0 trillion 
B)  4 percent; $2.5 trillion 
C)  8 percent; $1.5 trillion 
D)  0 percent; $3.5 trillion 
E)  4 percent; $1.5 trillion 
A)  6 percent; $2.0 trillion 
B)  4 percent; $2.5 trillion 
C)  8 percent; $1.5 trillion 
D)  0 percent; $3.5 trillion 
E)  4 percent; $1.5 trillion

Question 19

_______ reflects a use of loanable funds while ________ reflects a supply of loanable funds.

Accepted Answer

A)  Business investment; the government budget deficit. 
B)  International investment; business investment. 
C)  The government budge deficit; private saving. 
D)  A government budget surplus; a government budget deficit. 
E)  International borrowing; a government budget deficit. 
A)  Business investment; the government budget deficit. 
B)  International investment; business investment. 
C)  The government budge deficit; private saving. 
D)  A government budget surplus; a government budget deficit. 
E)  International borrowing; a government budget deficit.

Question 20

The distinction between physical and financial capital is that

Accepted Answer

A)  physical capital is equal to financial capital plus depreciation. 
B)  financial capital is used to purchase and operate physical capital. 
C)  the value of financial capital depends on the amount of available physical capital. 
D)  physical capital is equal to financial capital minus depreciation. 
E)  financial capital depreciates and physical capital does not. 
A)  physical capital is equal to financial capital plus depreciation. 
B)  financial capital is used to purchase and operate physical capital. 
C)  the value of financial capital depends on the amount of available physical capital. 
D)  physical capital is equal to financial capital minus depreciation. 
E)  financial capital depreciates and physical capital does not.

When the real interest rate the equilibrium real interest rate, there is a of loanable funds and the real interest rate .

What is the distinction between gross investment and net investment?

During 2009, a country's income was $6.0 trillion, its consumption was $5.5 trillion, and its wealth at the beginning of 2009 was $30.0 trillion.The country's wealth at the end of 2009 was

The demand for loanable funds curve shows the relationship between the quantity of loanable funds demanded and

Does a change in the real interest rate shift the supply of loanable funds curve? Explain your answer.

A decrease in people's disposable income

Economists use the term "financial markets" to mean the markets in which

If wealth , then saving increases, which is shown by a .

-In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve.If there is no Ricardo-Barro effect, the figure shows a situation in which the government has a budget

If there is no Ricardo-Barro effect, an increase in the government budget surplus will

The crowding-out effect describes how a government budget the real interest rate and thereby equilibrium investment.

The "crowding-out effect" refers to how a government budget deficit

A bond's price is $80 and the bond pays $8 in interest every year.The bond's interest rate is ________.

If the real interest rate falls, other things being the same, the quantity of loanable funds demanded and the quantity of loanable funds supplied .

Suppose the government's budget deficit increases by $500 billion.If there is no Ricardo-Barro effect, what occurs?

What do Fannie Mae and Freddie Mac have in common?

-The figure above shows the loanable funds market.The equilibrium real interest rate is and the equilibrium quantity of loanable funds is .

_ reflects a use of loanable funds while __ reflects a supply of loanable funds.

The distinction between physical and financial capital is that

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 10: Finance, Saving, and Investment

When the real interest rate ________ the equilibrium real interest rate, there is a ________ of loanable funds and the real interest rate ________.

What is the distinction between gross investment and net investment?

During 2009, a country's income was $6.0 trillion, its consumption was $5.5 trillion, and its wealth at the beginning of 2009 was $30.0 trillion.The country's wealth at the end of 2009 was

The demand for loanable funds curve shows the relationship between the quantity of loanable funds demanded and

Does a change in the real interest rate shift the supply of loanable funds curve? Explain your answer.

A decrease in people's disposable income

Economists use the term "financial markets" to mean the markets in which

If wealth ________, then saving increases, which is shown by a ________.

-In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve.If there is no Ricardo-Barro effect, the figure shows a situation in which the government has a budget

If there is no Ricardo-Barro effect, an increase in the government budget surplus will

The crowding-out effect describes how a government budget ________ ________ the real interest rate and thereby ________ equilibrium investment.

The "crowding-out effect" refers to how a government budget deficit

A bond's price is $80 and the bond pays $8 in interest every year.The bond's interest rate is ________.

If the real interest rate falls, other things being the same, the quantity of loanable funds demanded ________ and the quantity of loanable funds supplied ________.

Suppose the government's budget deficit increases by $500 billion.If there is no Ricardo-Barro effect, what occurs?

What do Fannie Mae and Freddie Mac have in common?

-The figure above shows the loanable funds market.The equilibrium real interest rate is ________ and the equilibrium quantity of loanable funds is ________.

_______ reflects a use of loanable funds while ________ reflects a supply of loanable funds.

The distinction between physical and financial capital is that

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

When the real interest rate the equilibrium real interest rate, there is a of loanable funds and the real interest rate .

If wealth , then saving increases, which is shown by a .

The crowding-out effect describes how a government budget the real interest rate and thereby equilibrium investment.

If the real interest rate falls, other things being the same, the quantity of loanable funds demanded and the quantity of loanable funds supplied .

-The figure above shows the loanable funds market.The equilibrium real interest rate is and the equilibrium quantity of loanable funds is .

_ reflects a use of loanable funds while __ reflects a supply of loanable funds.