Question 1

If foreigners spend more on U.S.-made goods and services than we spend on theirs,

Accepted Answer

A)  foreigners must borrow from the United States or sell U.S. assets to make up the difference. 
B)  all U.S. national saving remains in the United States 
C)  we must borrow from foreigners because of low imports. 
D)  funds flow in from abroad to help finance U.S. investment. 
A)  foreigners must borrow from the United States or sell U.S. assets to make up the difference. 
B)  all U.S. national saving remains in the United States 
C)  we must borrow from foreigners because of low imports. 
D)  funds flow in from abroad to help finance U.S. investment.

Question 2

$$\begin{array} { | l | c | } 
\hline{ \text { Item } } & \begin{array} { c } 
\text { Millions of } \
\text { dollars }
\end{array} \
\hline \begin{array} { l } 
\text { Personal consumption } \
\text { expenditure }
\end{array} & 80 \
\hline \begin{array} { l } 
\text { Government expenditure on } \
\text { goods and services }
\end{array} & 30 \
\hline \text { Net taxes } & 35 \
\hline \text { Gross private domestic } & 20 \
 \text { investment } &  \
\hline \begin{array} { l } 
\text { Imports of goods and services }
\end{array}&10 \
\hline\text { Exports of goods and services } & 20 \
\hline
\end{array}$$
-Use the information in the table above to calculate the value of government saving.

Accepted Answer

A)  $15 million 
B)  -$5 million 
C)  $5 million 
D)  $45 million 
A)  $15 million 
B)  -$5 million 
C)  $5 million 
D)  $45 million

Question 3

-In the above figure,the economy is at point a on the initial supply of loanable funds curve SLF₀.What happens if disposable income decreases?

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 4

The idea that a government budget deficit decreases investment is called

Accepted Answer

A)  government dissaving. 
B)  the crowding-out effect. 
C)  the Ricardo-Barro effect. 
D)  the capital investment effect. 
A)  government dissaving. 
B)  the crowding-out effect. 
C)  the Ricardo-Barro effect. 
D)  the capital investment effect.

Question 5

The term "capital," as used in macroeconomics,refers to

Accepted Answer

A)  the plant, equipment, buildings, and inventories of raw materials and semi-finished goods. 
B)  financial wealth. 
C)  the sum of investment and government purchases of goods. 
D)  investment. 
A)  the plant, equipment, buildings, and inventories of raw materials and semi-finished goods. 
B)  financial wealth. 
C)  the sum of investment and government purchases of goods. 
D)  investment.

Question 6

If the nominal interest rate is 8 percent and the current inflation rate is 3 percent,approximately what is the real interest rate?

Accepted Answer

A)  11 percent 
B)  8 percent 
C)  5 percent 
D)  3 percent 
A)  11 percent 
B)  8 percent 
C)  5 percent 
D)  3 percent

Question 7

If the government has a budget deficit,crowding out might occur.Crowding out leads to all of the following EXCEPT

Accepted Answer

A)  a higher real interest rate. 
B)  a decreased quantity of investment. 
C)  a smaller capital stock in the future. 
D)  decreased private saving. 
A)  a higher real interest rate. 
B)  a decreased quantity of investment. 
C)  a smaller capital stock in the future. 
D)  decreased private saving.

Question 8

-In the loanable funds market,as the interest rate rises the ________ and the ________.

Accepted Answer

A)  quantity of loanable funds supplied increases; quantity of loanable funds demanded decreases 
B)  quantity of loanable funds supplied decreases; quantity of loanable funds demanded increases 
C)  supply of loanable funds increases; demand for loanable funds decreases 
D)  supply of loanable funds decreases; demand for loanable funds increases 
A)  quantity of loanable funds supplied increases; quantity of loanable funds demanded decreases 
B)  quantity of loanable funds supplied decreases; quantity of loanable funds demanded increases 
C)  supply of loanable funds increases; demand for loanable funds decreases 
D)  supply of loanable funds decreases; demand for loanable funds increases

Question 9

A fall in the real interest rate

Accepted Answer

A)  results in a movement along the demand for loanable funds curve. 
B)  shifts the demand for loanable funds curve rightward. 
C)  shifts the demand for loanable funds curve leftward. 
D)  has no effect on the demand for loanable funds curve 
A)  results in a movement along the demand for loanable funds curve. 
B)  shifts the demand for loanable funds curve rightward. 
C)  shifts the demand for loanable funds curve leftward. 
D)  has no effect on the demand for loanable funds curve

Question 10

The term capital,as used in macroeconomics,refers to

Accepted Answer

A)  the amount of money that someone can invest in a new venture. 
B)  the amount of money a firm can raise in the stock market. 
C)  physical capital. 
D)  All of the above answers are correct. 
A)  the amount of money that someone can invest in a new venture. 
B)  the amount of money a firm can raise in the stock market. 
C)  physical capital. 
D)  All of the above answers are correct.

Question 11

In 2007,France's GDP totalled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. Suppose that depreciation is 12 percent of GDP. ________ investment in 2007 was ________ billion.

Accepted Answer

A)  Gross; $216 
B)  Gross; $129 
C)  Net; $228 
D)  Net; $129 
A)  Gross; $216 
B)  Gross; $129 
C)  Net; $228 
D)  Net; $129

Question 12

The term "crowding out" relates to the decrease in

Accepted Answer

A)  consumption expenditure from an increase in investment. 
B)  the real interest rate from a government budget deficit. 
C)  private investment from a government budget deficit. 
D)  saving from an increase in disposable income. 
A)  consumption expenditure from an increase in investment. 
B)  the real interest rate from a government budget deficit. 
C)  private investment from a government budget deficit. 
D)  saving from an increase in disposable income.

Question 13

-In the above figure,if the real interest rate is 6 percent,the quantity of loanable funds demanded is

Accepted Answer

A)  $150 billion. 
B)  $300 billion. 
C)  $450 billion. 
D)  $600 billion. 
A)  $150 billion. 
B)  $300 billion. 
C)  $450 billion. 
D)  $600 billion.

Question 14

A decrease in the real interest rate leads to

Accepted Answer

A)  an increase in investment demand so that the demand for loanable funds curve shifts rightward. 
B)  a fall in the capital stock. 
C)  an increase in the expected profit. 
D)  a movement downward along the demand for loanable funds curve. 
A)  an increase in investment demand so that the demand for loanable funds curve shifts rightward. 
B)  a fall in the capital stock. 
C)  an increase in the expected profit. 
D)  a movement downward along the demand for loanable funds curve.

Question 15

Which of the following influences household saving?
I. The real interest rate.
II. Disposable income.
III. Expected future income.

Accepted Answer

A)  I only 
B)  I and II 
C)  I and III 
D)  I, II, and III 
A)  I only 
B)  I and II 
C)  I and III 
D)  I, II, and III

Question 16

The demand for loanable funds is the relationship between loanable funds and the ________ other things remaining the same.

Accepted Answer

A)  real interest rate 
B)  nominal interest rate 
C)  inflation rate 
D)  price level 
A)  real interest rate 
B)  nominal interest rate 
C)  inflation rate 
D)  price level

Question 17

In the absence of a Ricardo-Barro effect,a government budget deficit ________ the demand for loanable funds and ________ investment.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 18

This year Pizza Hut makes a total investment of $1.3 billion in new stores.Its depreciation in this year is $300 million.Pizza Hut's gross investment is ________ and its net investment is ________.

Accepted Answer

A)  $1.3 billion; $1.6 billion 
B)  $1.0 billion; $1.3 billion 
C)  $1.3 billion; $1.0 billion 
D)  $1.0 billion; $0.7 billion 
A)  $1.3 billion; $1.6 billion 
B)  $1.0 billion; $1.3 billion 
C)  $1.3 billion; $1.0 billion 
D)  $1.0 billion; $0.7 billion

Question 19

Which of the following is TRUE regarding the real interest rate?
I. The real interest rate is the opportunity cost of borrowed funds.
II. The real interest rate equals the nominal interest rate adjusted for inflation.

Accepted Answer

A)  I 
B)  II 
C)  both I and II 
D)  neither I nor II 
A)  I 
B)  II 
C)  both I and II 
D)  neither I nor II

Question 20

Changes in all of the following shift the supply curve of loanable funds EXCEPT

Accepted Answer

A)  the real interest rate. 
B)  wealth. 
C)  disposable income. 
D)  expected future income. 
A)  the real interest rate. 
B)  wealth. 
C)  disposable income. 
D)  expected future income.

If foreigners spend more on U.S.-made goods and services than we spend on theirs,

-In the above figure,the economy is at point a on the initial supply of loanable funds curve SLF₀.What happens if disposable income decreases?

The idea that a government budget deficit decreases investment is called

The term "capital," as used in macroeconomics,refers to

If the nominal interest rate is 8 percent and the current inflation rate is 3 percent,approximately what is the real interest rate?

If the government has a budget deficit,crowding out might occur.Crowding out leads to all of the following EXCEPT

-In the loanable funds market,as the interest rate rises the and the .

A fall in the real interest rate

The term capital,as used in macroeconomics,refers to

In 2007,France's GDP totalled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. Suppose that depreciation is 12 percent of GDP. investment in 2007 was billion.

The term "crowding out" relates to the decrease in

-In the above figure,if the real interest rate is 6 percent,the quantity of loanable funds demanded is

A decrease in the real interest rate leads to

Which of the following influences household saving? I. The real interest rate. II. Disposable income. III. Expected future income.

The demand for loanable funds is the relationship between loanable funds and the ________ other things remaining the same.

In the absence of a Ricardo-Barro effect,a government budget deficit the demand for loanable funds and investment.

This year Pizza Hut makes a total investment of $1.3 billion in new stores.Its depreciation in this year is $300 million.Pizza Hut's gross investment is and its net investment is .

Which of the following is TRUE regarding the real interest rate? I. The real interest rate is the opportunity cost of borrowed funds. II. The real interest rate equals the nominal interest rate adjusted for inflation.

Changes in all of the following shift the supply curve of loanable funds EXCEPT

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

If foreigners spend more on U.S.-made goods and services than we spend on theirs,

-In the above figure,the economy is at point a on the initial supply of loanable funds curve SLF₀.What happens if disposable income decreases?

The idea that a government budget deficit decreases investment is called

The term "capital," as used in macroeconomics,refers to

If the nominal interest rate is 8 percent and the current inflation rate is 3 percent,approximately what is the real interest rate?

If the government has a budget deficit,crowding out might occur.Crowding out leads to all of the following EXCEPT

-In the loanable funds market,as the interest rate rises the ________ and the ________.

A fall in the real interest rate

The term capital,as used in macroeconomics,refers to

In 2007,France's GDP totalled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. Suppose that depreciation is 12 percent of GDP. ________ investment in 2007 was ________ billion.

The term "crowding out" relates to the decrease in

-In the above figure,if the real interest rate is 6 percent,the quantity of loanable funds demanded is

A decrease in the real interest rate leads to

Which of the following influences household saving? I. The real interest rate. II. Disposable income. III. Expected future income.

The demand for loanable funds is the relationship between loanable funds and the ________ other things remaining the same.

In the absence of a Ricardo-Barro effect,a government budget deficit ________ the demand for loanable funds and ________ investment.

This year Pizza Hut makes a total investment of $1.3 billion in new stores.Its depreciation in this year is $300 million.Pizza Hut's gross investment is ________ and its net investment is ________.

Which of the following is TRUE regarding the real interest rate? I. The real interest rate is the opportunity cost of borrowed funds. II. The real interest rate equals the nominal interest rate adjusted for inflation.

Changes in all of the following shift the supply curve of loanable funds EXCEPT

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

-In the loanable funds market,as the interest rate rises the and the .

In 2007,France's GDP totalled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. Suppose that depreciation is 12 percent of GDP. investment in 2007 was billion.

In the absence of a Ricardo-Barro effect,a government budget deficit the demand for loanable funds and investment.

This year Pizza Hut makes a total investment of $1.3 billion in new stores.Its depreciation in this year is $300 million.Pizza Hut's gross investment is and its net investment is .