Question 1

-The figure above shows the loanable funds market.If the real interest rate is 2 percent, then there

Accepted Answer

A)  will be government intervention in the market to make sure there is no credit crisis. 
B)  will be a leftward shift in the demand for loanable funds curve. 
C)  is a surplus in the loanable funds market. 
D)  is a shortage in the loanable funds market 
E)  demand for loanable funds curve will shift rightward. 
A)  will be government intervention in the market to make sure there is no credit crisis. 
B)  will be a leftward shift in the demand for loanable funds curve. 
C)  is a surplus in the loanable funds market. 
D)  is a shortage in the loanable funds market 
E)  demand for loanable funds curve will shift rightward.

Question 2

The total amount spent to buy new physical capital and replace old capital is referred to as

Accepted Answer

A)  depreciation. 
B)  net investment. 
C)  savings. 
D)  gross investment. 
E)  wealth. 
A)  depreciation. 
B)  net investment. 
C)  savings. 
D)  gross investment. 
E)  wealth.

Question 3

Net investment equals

Accepted Answer

A)  new capital plus old capital. 
B)  capital plus depreciation. 
C)  gross investment minus depreciation. 
D)  gross investment plus depreciation. 
E)  the amount of national wealth. 
A)  new capital plus old capital. 
B)  capital plus depreciation. 
C)  gross investment minus depreciation. 
D)  gross investment plus depreciation. 
E)  the amount of national wealth.

Question 4

-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.Given these curves, there is a government budget ________ and therefore the real interest rate is ________ than it would be otherwise.

Accepted Answer

A)  surplus; higher 
B)  surplus; lower 
C)  deficit; higher 
D)  deficit; lower 
E)  deficit; not different 
A)  surplus; higher 
B)  surplus; lower 
C)  deficit; higher 
D)  deficit; lower 
E)  deficit; not different

Question 5

If the government runs a budget deficit to fight a war and there is no Ricardo-Barro effect, what is an impact of the deficit?

Accepted Answer

A)  the quantity of private saving decreases 
B)  firms purchase more capital equipment 
C)  animal spirits or irrational exuberance is created 
D)  the real interest rate rises 
E)  the quantity of investment increases 
A)  the quantity of private saving decreases 
B)  firms purchase more capital equipment 
C)  animal spirits or irrational exuberance is created 
D)  the real interest rate rises 
E)  the quantity of investment increases

Question 6

India's government runs a government budget surplus. If there is no Ricardo-Barro effect, the surplus means that the

Accepted Answer

A)  private supply of loanable funds curve lies to the left of the supply of loanable funds curve. 
B)  private demand for loanable funds curve lies to the left of the demand for loanable funds curve. 
C)  private supply of loanable funds curve lies to the right of the supply of loanable funds curve. 
D)  private demand for loanable funds curve lies to the left of the demand for loanable funds curve 
E)  None of the above answers are correct 
A)  private supply of loanable funds curve lies to the left of the supply of loanable funds curve. 
B)  private demand for loanable funds curve lies to the left of the demand for loanable funds curve. 
C)  private supply of loanable funds curve lies to the right of the supply of loanable funds curve. 
D)  private demand for loanable funds curve lies to the left of the demand for loanable funds curve 
E)  None of the above answers are correct

Question 7

The real interest rate is ________ related to the supply of loanable funds because ________.

Accepted Answer

A)  positively; the opportunity cost of consumption expenditure increases as the real interest rate rises. 
B)  negatively; the opportunity cost of consumption expenditure increases as the real interest rate rises. 
C)  positively; people are motivated to increase their consumption expenditure as the real interest rate rises. 
D)  negatively; people are motivated to save more as the real interest rate rises. 
E)  None of the above answers are correct. 
A)  positively; the opportunity cost of consumption expenditure increases as the real interest rate rises. 
B)  negatively; the opportunity cost of consumption expenditure increases as the real interest rate rises. 
C)  positively; people are motivated to increase their consumption expenditure as the real interest rate rises. 
D)  negatively; people are motivated to save more as the real interest rate rises. 
E)  None of the above answers are correct.

Question 8

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Real interest rate } \
\text { (percent per year) }
\end{array} & \begin{array} { c } 
\text { Demand for loanable funds Supply of loanable funds } \
\text { (billions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { (billions of } \
\text { 2005 dollars) }
\end{array} \
\hline 3 & 750 & 450 \
4 & 700 & 500 \
5 & 650 & 550 \
6 & 600 & 600 \
7 & 550 & 650 \
8 & 500 & 700 \
9 & 450 & 750
\end{array}$$
-The above table has the private demand for loanable funds and the private supply of loanable funds schedules.If the government budget deficit is $200 billion, and there is no Ricardo-Barro effect, the equilibrium real interest rate is ________ and the equilibrium quantity of investment 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 9

A document that promises to pay specified sums of money on specified dates and is a debt to the issuer is called

Accepted Answer

A)  a stock. 
B)  a bond. 
C)  net investment. 
D)  depreciation. 
E)  gross investment. 
A)  a stock. 
B)  a bond. 
C)  net investment. 
D)  depreciation. 
E)  gross investment.

Question 10

Which of the following factors does NOT shift the supply of loanable funds curve?
i. change in disposable income
ii. change in wealth
iii. change in expected profit

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  i and ii 
E)  ii and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  i and ii 
E)  ii and iii

Question 11

Net investment equals

Accepted Answer

A)  gross financial capital minus stock dividends. 
B)  depreciation plus gross investment. 
C)  gross investment minus interest payments. 
D)  gross investment minus depreciation. 
E)  depreciation minus gross investment. 
A)  gross financial capital minus stock dividends. 
B)  depreciation plus gross investment. 
C)  gross investment minus interest payments. 
D)  gross investment minus depreciation. 
E)  depreciation minus gross investment.

Question 12

Suppose the government has a budget deficit of $2 billion.If the Ricardo-Barro effect is correct, then how much crowding out of investment occurs?

Accepted Answer

A)  more than $2 billion 
B)  some crowding out occurs, but less than $2 billion 
C)  exactly equal to $2 billion dollars 
D)  no crowding out occurs and investment does not change 
E)  no crowding out occurs because investment increases by $2 billion 
A)  more than $2 billion 
B)  some crowding out occurs, but less than $2 billion 
C)  exactly equal to $2 billion dollars 
D)  no crowding out occurs and investment does not change 
E)  no crowding out occurs because investment increases by $2 billion

Question 13

The demand for loanable funds includes demand for i) loans
Ii) stocks
Iii) bonds

Accepted Answer

A)  i, ii and iii. 
B)  i only. 
C)  i and ii. 
D)  iii only. 
E)  ii and iii. 
A)  i, ii and iii. 
B)  i only. 
C)  i and ii. 
D)  iii only. 
E)  ii and iii.

Question 14

Technological change can increase the demand for loanable funds because it

Accepted Answer

A)  lowers the interest rate. 
B)  can increase the expected profit. 
C)  has little effect on production cost. 
D)  decreases the need for additional equipment. 
E)  increases people's expected future disposable income. 
A)  lowers the interest rate. 
B)  can increase the expected profit. 
C)  has little effect on production cost. 
D)  decreases the need for additional equipment. 
E)  increases people's expected future disposable income.

Question 15

An increase in people's expected disposable income ________ saving supply and the supply of loanable funds curve ________.

Accepted Answer

A)  decreases; shifts rightward 
B)  decreases; shifts leftward 
C)  increases; shifts rightward 
D)  increases; shifts leftward 
E)  does not change; does not shift 
A)  decreases; shifts rightward 
B)  decreases; shifts leftward 
C)  increases; shifts rightward 
D)  increases; shifts leftward 
E)  does not change; does not shift

Question 16

Suppose the government has a budget surplus of $2 billion.If there is no Ricardo-Barro effect, what occurs?

Accepted Answer

A)  The supply of loanable funds curve shifts rightward, lowering the interest rate, and increasing investment. 
B)  The demand for loanable funds curve shifts rightward, raising the interest rate, and increasing investment. 
C)  The supply of loanable funds curve shifts leftward, raising the interest rate, and decreasing investment. 
D)  The demand for loanable funds curve shifts leftward, lowering the interest rate, and decreasing investment. 
E)  The supply of loanable funds curve shifts leftward, lowering the interest rate, and increasing investment. 
A)  The supply of loanable funds curve shifts rightward, lowering the interest rate, and increasing investment. 
B)  The demand for loanable funds curve shifts rightward, raising the interest rate, and increasing investment. 
C)  The supply of loanable funds curve shifts leftward, raising the interest rate, and decreasing investment. 
D)  The demand for loanable funds curve shifts leftward, lowering the interest rate, and decreasing investment. 
E)  The supply of loanable funds curve shifts leftward, lowering the interest rate, and increasing investment.

Question 17

The demand for loanable funds curve shows the

Accepted Answer

A)  negative relationship between the interest rate and the quantity of loanable funds demanded. 
B)  positive relationship between the interest rate and the quantity of loanable funds demanded. 
C)  negative relationship between the demand for loanable funds curve and the supply of loanable funds curve. 
D)  positive relationship between the demand for loanable funds curve and the supply of loanable funds curve. 
E)  U-shaped relationship between the interest rate and the quantity of loanable funds demanded. 
A)  negative relationship between the interest rate and the quantity of loanable funds demanded. 
B)  positive relationship between the interest rate and the quantity of loanable funds demanded. 
C)  negative relationship between the demand for loanable funds curve and the supply of loanable funds curve. 
D)  positive relationship between the demand for loanable funds curve and the supply of loanable funds curve. 
E)  U-shaped relationship between the interest rate and the quantity of loanable funds demanded.

Question 18

What are the factors that change saving and shift the supply of loanable funds curve?

Accepted Answer

There are three main factors that change

Question 19

If the real interest rate is less than the equilibrium real interest rate, there is a ________ of loanable funds and ________.

Accepted Answer

A)  surplus; some borrowers cannot find the funds they want 
B)  shortage; some borrowers cannot find the funds they want 
C)  surplus; borrowers have an easy time finding the funds they want 
D)  shortage; borrowers have an easy time finding the funds they want 
E)  shortage; savers increase their saving supply to restore the equilibrium 
A)  surplus; some borrowers cannot find the funds they want 
B)  shortage; some borrowers cannot find the funds they want 
C)  surplus; borrowers have an easy time finding the funds they want 
D)  shortage; borrowers have an easy time finding the funds they want 
E)  shortage; savers increase their saving supply to restore the equilibrium

Question 20

Government saving is equal to

Accepted Answer

A)  the quantity of investment demanded. 
B)  net taxes minus government expenditures. 
C)  net taxes plus government expenditures. 
D)  private savings minus government expenditures. 
E)  net taxes. 
A)  the quantity of investment demanded. 
B)  net taxes minus government expenditures. 
C)  net taxes plus government expenditures. 
D)  private savings minus government expenditures. 
E)  net taxes.

-The figure above shows the loanable funds market.If the real interest rate is 2 percent, then there

The total amount spent to buy new physical capital and replace old capital is referred to as

Net investment equals

-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.Given these curves, there is a government budget and therefore the real interest rate is than it would be otherwise.

If the government runs a budget deficit to fight a war and there is no Ricardo-Barro effect, what is an impact of the deficit?

India's government runs a government budget surplus. If there is no Ricardo-Barro effect, the surplus means that the

The real interest rate is related to the supply of loanable funds because .

A document that promises to pay specified sums of money on specified dates and is a debt to the issuer is called

Which of the following factors does NOT shift the supply of loanable funds curve? i. change in disposable income ii. change in wealth iii. change in expected profit

Net investment equals

Suppose the government has a budget deficit of $2 billion.If the Ricardo-Barro effect is correct, then how much crowding out of investment occurs?

The demand for loanable funds includes demand for i) loans Ii) stocks Iii) bonds

Technological change can increase the demand for loanable funds because it

An increase in people's expected disposable income saving supply and the supply of loanable funds curve .

Suppose the government has a budget surplus of $2 billion.If there is no Ricardo-Barro effect, what occurs?

The demand for loanable funds curve shows the

What are the factors that change saving and shift the supply of loanable funds curve?

If the real interest rate is less than the equilibrium real interest rate, there is a of loanable funds and .

Government saving is equal to

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

-The figure above shows the loanable funds market.If the real interest rate is 2 percent, then there

The total amount spent to buy new physical capital and replace old capital is referred to as

Net investment equals

-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.Given these curves, there is a government budget ________ and therefore the real interest rate is ________ than it would be otherwise.

If the government runs a budget deficit to fight a war and there is no Ricardo-Barro effect, what is an impact of the deficit?

India's government runs a government budget surplus. If there is no Ricardo-Barro effect, the surplus means that the

The real interest rate is ________ related to the supply of loanable funds because ________.

A document that promises to pay specified sums of money on specified dates and is a debt to the issuer is called

Which of the following factors does NOT shift the supply of loanable funds curve? i. change in disposable income ii. change in wealth iii. change in expected profit

Net investment equals

Suppose the government has a budget deficit of $2 billion.If the Ricardo-Barro effect is correct, then how much crowding out of investment occurs?

The demand for loanable funds includes demand for i) loans Ii) stocks Iii) bonds

Technological change can increase the demand for loanable funds because it

An increase in people's expected disposable income ________ saving supply and the supply of loanable funds curve ________.

Suppose the government has a budget surplus of $2 billion.If there is no Ricardo-Barro effect, what occurs?

The demand for loanable funds curve shows the

What are the factors that change saving and shift the supply of loanable funds curve?

If the real interest rate is less than the equilibrium real interest rate, there is a ________ of loanable funds and ________.

Government saving is equal to

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

-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.Given these curves, there is a government budget and therefore the real interest rate is than it would be otherwise.

The real interest rate is related to the supply of loanable funds because .

An increase in people's expected disposable income saving supply and the supply of loanable funds curve .

If the real interest rate is less than the equilibrium real interest rate, there is a of loanable funds and .