Question 1

-In the above figure,the economy is at point a on the initial supply of loanable funds curve SLF₀.What happens if the real interest rate rises?

Accepted Answer

A)  Nothing; the economy would remain at point a. 
B)  There would be a movement to a point such as b on supply of loanable funds curve SLF₀. 
C)  The supply of loanable funds curve would shift rightward to a curve such as SLF₂. 
D)  The supply of loanable funds curve would shift leftward to a curve such as SLF₁. 
A)  Nothing; the economy would remain at point a. 
B)  There would be a movement to a point such as b on supply of loanable funds curve SLF₀. 
C)  The supply of loanable funds curve would shift rightward to a curve such as SLF₂. 
D)  The supply of loanable funds curve would shift leftward to a curve such as SLF₁.

Question 2

Which of the following is NOT a determinant of household saving?

Accepted Answer

A)  the nominal interest rate 
B)  disposable income 
C)  the household's wealth 
D)  expected future income 
A)  the nominal interest rate 
B)  disposable income 
C)  the household's wealth 
D)  expected future income

Question 3

Approximately,the real interest rate ________ the inflation rate ________ the nominal interest rate.

Accepted Answer

A)  plus; equals 
B)  equals; plus 
C)  equals; minus 
D)  minus; equals 
A)  plus; equals 
B)  equals; plus 
C)  equals; minus 
D)  minus; equals

Question 4

If China's government runs a budget surplus and there is no Ricardo-Barro effect,there will be ________ in the supply of loanable funds,private saving ________ and investment ________.

Accepted Answer

A)  an increase; decreases; increases 
B)  a decrease; increases; increases 
C)  an increase; increases; increases 
D)  a decrease; decrease; increases 
A)  an increase; decreases; increases 
B)  a decrease; increases; increases 
C)  an increase; increases; increases 
D)  a decrease; decrease; increases

Question 5

A decrease in disposable income shifts the ________.

Accepted Answer

A)  demand for loanable funds curve rightward 
B)  demand for loanable funds curve leftward 
C)  supply of loanable funds curve leftward 
D)  supply of loanable funds curve rightward 
A)  demand for loanable funds curve rightward 
B)  demand for loanable funds curve leftward 
C)  supply of loanable funds curve leftward 
D)  supply of loanable funds curve rightward

Question 6

Gross investment

Accepted Answer

A)  is the purchase of new capital. 
B)  includes only replacement investment. 
C)  does not include additions to inventories. 
D)  Both answers A and B are correct. 
A)  is the purchase of new capital. 
B)  includes only replacement investment. 
C)  does not include additions to inventories. 
D)  Both answers A and B are correct.

Question 7

"When there is a shortage of loanable funds,the real interest rate will increase." Explain whether the previous statement is correct or not.

Accepted Answer

The statement is correct.The shortage of

Question 8

-In the above figure,if the real interest rate is 8,there is

Accepted Answer

A)  underproduction in this economy. 
B)  a surplus of loanable funds. 
C)  a shortage of loanable funds. 
D)  a shortage in available funds for investment. 
A)  underproduction in this economy. 
B)  a surplus of loanable funds. 
C)  a shortage of loanable funds. 
D)  a shortage in available funds for investment.

Question 9

There is a positive relationship between the demand for loanable funds and the real interest rate.

Accepted Answer

A) True 
 B)False

Question 10

The supply of loanable funds curve shifts leftward if the real interest rate rises.

Accepted Answer

A) True 
 B)False

Question 11

7 Numeric and Graphing Questions
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Real interest } \
\text { rate } \
\text { (percent per } \
\text { year) }
\end{array} & \begin{array} { c } 
\text { Loanable } \
\text { funds } \
\text { demanded } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Loanable } \
\text { funds } \
\text { supplied } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 10 & 0.7 & 1.5 \
\hline 8 & 0.9 & 1.3 \
\hline 6 & 1.1 & 1.1 \
\hline 4 & 1.4 & 0.9 \
\hline 2 & 1.7 & 0.7 \
\hline
\end{array}$$
-The table above shows the loanable funds supply and demand schedules.
a) What is the equilibrium real interest rate and the equilibrium quantity of loanable funds?
b) If the real interest rate is 4 percent,is there a shortage or surplus?
What will happen in the market?

Accepted Answer

a)The equilibrium real interest rate is

Question 12

The tendency for private saving to increase in response to growing government deficits is known as the

Accepted Answer

A)  crowding out effect. 
B)  money illusion effect. 
C)  Keynes effect. 
D)  Ricardo-Barro effect. 
A)  crowding out effect. 
B)  money illusion effect. 
C)  Keynes effect. 
D)  Ricardo-Barro effect.

Question 13

How does expected future income affect saving supply?

Accepted Answer

Expected future income affects

Question 14

In 2007,the interest rate banks in France charge each other for loans was 4.86 percent. The inflation rate in France in 2007 was 2.8 percent. The real interest rate in France is

Accepted Answer

A)  7.62 percent 
B)  2.06 percent. 
C)  0.58 percent. 
D)  13.6 percent. 
A)  7.62 percent 
B)  2.06 percent. 
C)  0.58 percent. 
D)  13.6 percent.

Question 15

Facebook sold shares of stock for the first time in an IPO on May 18,2012. The stock originally sold for $38 per share. As of October 19,2012,a share of Facebook stock was valued at $19 per share. The decrease in the value of a share of Facebook purchased in May and still owned in October is called

Accepted Answer

A)  a capital gain. 
B)  a capital loss. 
C)  gross investment. 
D)  net investment. 
A)  a capital gain. 
B)  a capital loss. 
C)  gross investment. 
D)  net investment.

Question 16

"An increase in the real interest rate increases the quantity of investment." Is the previous statement correct or incorrect?

Accepted Answer

The statement is false.The int

Question 17

A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from

Accepted Answer

A)  an increase in the real interest rate. 
B)  technological improvements. 
C)  tax cuts. 
D)  decreases in the expected profit. 
A)  an increase in the real interest rate. 
B)  technological improvements. 
C)  tax cuts. 
D)  decreases in the expected profit.

Question 18

Initially the nominal interest rate is 8 percent and the inflation rate is 5 percent.People know that the inflation rate increases to 10 percent.What is the new nominal interest rate?

Accepted Answer

A)  8 percent 
B)  3 percent 
C)  13 percent 
D)  11 percent 
A)  8 percent 
B)  3 percent 
C)  13 percent 
D)  11 percent

Question 19

All of the following are sources of loanable funds except

Accepted Answer

A)  business investment. 
B)  private saving. 
C)  government budget surplus. 
D)  international borrowing. 
A)  business investment. 
B)  private saving. 
C)  government budget surplus. 
D)  international borrowing.

Question 20

The ________ interest rate approximately equals the ________ interest rate minus ________.

Accepted Answer

A)  nominal; real; depreciation 
B)  nominal; real; the inflation rate 
C)  real; nominal; depreciation 
D)  real; nominal; the inflation rate 
A)  nominal; real; depreciation 
B)  nominal; real; the inflation rate 
C)  real; nominal; depreciation 
D)  real; nominal; the inflation rate

-In the above figure,the economy is at point a on the initial supply of loanable funds curve SLF₀.What happens if the real interest rate rises?

Which of the following is NOT a determinant of household saving?

Approximately,the real interest rate the inflation rate the nominal interest rate.

If China's government runs a budget surplus and there is no Ricardo-Barro effect,there will be in the supply of loanable funds,private saving and investment .

A decrease in disposable income shifts the ________.

Gross investment

"When there is a shortage of loanable funds,the real interest rate will increase." Explain whether the previous statement is correct or not.

-In the above figure,if the real interest rate is 8,there is

There is a positive relationship between the demand for loanable funds and the real interest rate.

The supply of loanable funds curve shifts leftward if the real interest rate rises.

The tendency for private saving to increase in response to growing government deficits is known as the

How does expected future income affect saving supply?

In 2007,the interest rate banks in France charge each other for loans was 4.86 percent. The inflation rate in France in 2007 was 2.8 percent. The real interest rate in France is

Facebook sold shares of stock for the first time in an IPO on May 18,2012. The stock originally sold for $38 per share. As of October 19,2012,a share of Facebook stock was valued at $19 per share. The decrease in the value of a share of Facebook purchased in May and still owned in October is called

"An increase in the real interest rate increases the quantity of investment." Is the previous statement correct or incorrect?

A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from

Initially the nominal interest rate is 8 percent and the inflation rate is 5 percent.People know that the inflation rate increases to 10 percent.What is the new nominal interest rate?

All of the following are sources of loanable funds except

The interest rate approximately equals the interest rate minus .

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 7: Finance, Saving, and Investment

-In the above figure,the economy is at point a on the initial supply of loanable funds curve SLF₀.What happens if the real interest rate rises?

Which of the following is NOT a determinant of household saving?

Approximately,the real interest rate ________ the inflation rate ________ the nominal interest rate.

If China's government runs a budget surplus and there is no Ricardo-Barro effect,there will be ________ in the supply of loanable funds,private saving ________ and investment ________.

A decrease in disposable income shifts the ________.

Gross investment

"When there is a shortage of loanable funds,the real interest rate will increase." Explain whether the previous statement is correct or not.

-In the above figure,if the real interest rate is 8,there is

There is a positive relationship between the demand for loanable funds and the real interest rate.

The supply of loanable funds curve shifts leftward if the real interest rate rises.

The tendency for private saving to increase in response to growing government deficits is known as the

How does expected future income affect saving supply?

In 2007,the interest rate banks in France charge each other for loans was 4.86 percent. The inflation rate in France in 2007 was 2.8 percent. The real interest rate in France is

Facebook sold shares of stock for the first time in an IPO on May 18,2012. The stock originally sold for $38 per share. As of October 19,2012,a share of Facebook stock was valued at $19 per share. The decrease in the value of a share of Facebook purchased in May and still owned in October is called

"An increase in the real interest rate increases the quantity of investment." Is the previous statement correct or incorrect?

A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from

Initially the nominal interest rate is 8 percent and the inflation rate is 5 percent.People know that the inflation rate increases to 10 percent.What is the new nominal interest rate?

All of the following are sources of loanable funds except

The ________ interest rate approximately equals the ________ interest rate minus ________.

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Approximately,the real interest rate the inflation rate the nominal interest rate.

If China's government runs a budget surplus and there is no Ricardo-Barro effect,there will be in the supply of loanable funds,private saving and investment .

The interest rate approximately equals the interest rate minus .