Question 1

If the government's budget deficit increases and the Ricardo-Barro effect does not apply,

Accepted Answer

A)  the real interest rate rises. 
B)  investment increases 
C)  investment decreases 
D)  Both answers A and C are correct. 
A)  the real interest rate rises. 
B)  investment increases 
C)  investment decreases 
D)  Both answers A and C are correct.

Question 2

If the government runs a budget deficit,then

Accepted Answer

A)  national saving is negative. 
B)  household but not business saving must pay for the deficit. 
C)  part of household and business saving finances the deficit. 
D)  national saving cannot fund investment. 
A)  national saving is negative. 
B)  household but not business saving must pay for the deficit. 
C)  part of household and business saving finances the deficit. 
D)  national saving cannot fund investment.

Question 3

Which of the following is true?
I. As the real interest rate increases,people increase the quantity they save.
II. The supply of loanable funds curve is downward sloping.
III. As disposable income increases,the supply of loanable funds curve becomes steeper.

Accepted Answer

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

Question 4

In the loanable funds market,what variable changes to eliminate a shortage of loanable funds and how is the shortage eliminated?

Accepted Answer

The real interest rate changes to elimin

Question 5

A share of Apple stock has a price of $430 and gives $43 of Apple profit to its owner. The interest rate on this share

Accepted Answer

A)  10 percent. 
B)  $430. 
C)  15.4 percent 
D)  $43 
A)  10 percent. 
B)  $430. 
C)  15.4 percent 
D)  $43

Question 6

An increase in the real interest rate ________ the quantity of loanable funds supplied and ________ the quantity of loanable funds demanded.

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 7

The real interest rate

Accepted Answer

A)  can never be negative. 
B)  is approximately equal to the nominal interest rate plus the inflation rate. 
C)  is approximately equal to the nominal interest rate minus the inflation rate. 
D)  is positively related to the inflation rate. 
A)  can never be negative. 
B)  is approximately equal to the nominal interest rate plus the inflation rate. 
C)  is approximately equal to the nominal interest rate minus the inflation rate. 
D)  is positively related to the inflation rate.

Question 8

If households' disposable income decreases,then

Accepted Answer

A)  households' saving will decrease. 
B)  households' saving will increase. 
C)  investment will increase. 
D)  Both B and C are correct. 
A)  households' saving will decrease. 
B)  households' saving will increase. 
C)  investment will increase. 
D)  Both B and C are correct.

Question 9

If people expect an inflation rate of 3.3 percent,and the real interest rate is 3 percent,the nominal interest rate equals (approximately)

Accepted Answer

A)  0.3 percent. 
B)  8.6 percent. 
C)  6.3 percent. 
D)  9.9 percent. 
A)  0.3 percent. 
B)  8.6 percent. 
C)  6.3 percent. 
D)  9.9 percent.

Question 10

A increase in disposable income ________.

Accepted Answer

A)  has no effect on the supply of loanable funds curve 
B)  shifts the supply of loanable funds curve rightward 
C)  shifts the supply of loanable funds curve leftward 
D)  results in movement up the supply of loanable funds curve 
A)  has no effect on the supply of loanable funds curve 
B)  shifts the supply of loanable funds curve rightward 
C)  shifts the supply of loanable funds curve leftward 
D)  results in movement up the supply of loanable funds curve

Question 11

At the beginning of the year,Tom's Tubes had a capital stock of 5 tube inflating machines.During the year,Tom scrapped 2 old machines and purchased 3 new machines.Tom's gross investment for the year totaled

Accepted Answer

A)  1 machine. 
B)  2 machines. 
C)  3 machines. 
D)  6 machines. 
A)  1 machine. 
B)  2 machines. 
C)  3 machines. 
D)  6 machines.

Question 12

The nominal interest rate approximately equals which of the following?

Accepted Answer

A)  the real interest rate minus the inflation rate 
B)  the real interest rate plus the inflation rate 
C)  the real interest rate minus the growth rate of real GDP 
D)  the real interest rate plus the growth rate of real GDP 
A)  the real interest rate minus the inflation rate 
B)  the real interest rate plus the inflation rate 
C)  the real interest rate minus the growth rate of real GDP 
D)  the real interest rate plus the growth rate of real GDP

Question 13

The crowding-out effect refers to

Accepted Answer

A)  government spending crowding out private spending. 
B)  private saving crowding out government saving. 
C)  government investment crowding out private investment. 
D)  private investment crowding out government saving. 
A)  government spending crowding out private spending. 
B)  private saving crowding out government saving. 
C)  government investment crowding out private investment. 
D)  private investment crowding out government saving.

Question 14

People expect an inflation rate of 5 percent and the real interest rate is positive.Consequently the nominal interest rate will be

Accepted Answer

A)  more than 5 percent. 
B)  5 percent. 
C)  less than 5 percent. 
D)  Without more information it is impossible to tell if the nominal interest rate will be more than, less than, or equal to 5 percent. 
A)  more than 5 percent. 
B)  5 percent. 
C)  less than 5 percent. 
D)  Without more information it is impossible to tell if the nominal interest rate will be more than, less than, or equal to 5 percent.

Question 15

Begin with the formula showing how households can divide their income.Then use this formula and the expenditure approach to GDP to show how investment is financed from three sources.

Accepted Answer

The formula showing how households can d

Question 16

The expected profit from an investment will change with

Accepted Answer

A)  a change in the real interest rate. 
B)  a change in technology. 
C)  Both A and B are correct. 
D)  Neither A nor B is correct. 
A)  a change in the real interest rate. 
B)  a change in technology. 
C)  Both A and B are correct. 
D)  Neither A nor B is correct.

Question 17

The U.S.personal savings rate for the first quarter of 2012 dropped to its lowest level since the start of the recession.Americans stashed away 3.6 percent of personal income in the first quarter,down from 4.2 percent in the fourth quarter and a near-term peak of 6.2 percent in the second quarter of 2009. Which of the following could explain this drop in savings?

Accepted Answer

A)  a decrease in wealth from a fall in stock prices 
B)  a rise in the real interest rate 
C)  a increase in disposable income as the job market recovers 
D)  a rise in consumer confidence that their incomes will be higher in the future 
A)  a decrease in wealth from a fall in stock prices 
B)  a rise in the real interest rate 
C)  a increase in disposable income as the job market recovers 
D)  a rise in consumer confidence that their incomes will be higher in the future

Question 18

Net investment equals

Accepted Answer

A)  capital stock minus depreciation. 
B)  gross investment minus depreciation. 
C)  the total quantity of plant, equipment and buildings. 
D)  gross investment/depreciation. 
A)  capital stock minus depreciation. 
B)  gross investment minus depreciation. 
C)  the total quantity of plant, equipment and buildings. 
D)  gross investment/depreciation.

Question 19

A decrease in the real interest rate leads to a ________ the demand for loanable funds curve,and a decrease in the expected profit leads to a ________ the demand for loanable funds curve.

Accepted Answer

A)  rightward shift in; leftward shift in 
B)  movement down along; movement up along 
C)  rightward shift in; movement up along 
D)  movement down along; leftward shift in 
A)  rightward shift in; leftward shift in 
B)  movement down along; movement up along 
C)  rightward shift in; movement up along 
D)  movement down along; leftward shift in

Question 20

The quantity of ________ by households will be less ________.

Accepted Answer

A)  saving; the higher is disposable income 
B)  saving; the lower is the real interest rate 
C)  consumption; the lower is the inflation rate 
D)  consumption; the higher is disposable income 
A)  saving; the higher is disposable income 
B)  saving; the lower is the real interest rate 
C)  consumption; the lower is the inflation rate 
D)  consumption; the higher is disposable income

If the government's budget deficit increases and the Ricardo-Barro effect does not apply,

If the government runs a budget deficit,then

Which of the following is true? I. As the real interest rate increases,people increase the quantity they save. II. The supply of loanable funds curve is downward sloping. III. As disposable income increases,the supply of loanable funds curve becomes steeper.

In the loanable funds market,what variable changes to eliminate a shortage of loanable funds and how is the shortage eliminated?

A share of Apple stock has a price of $430 and gives $43 of Apple profit to its owner. The interest rate on this share

An increase in the real interest rate the quantity of loanable funds supplied and the quantity of loanable funds demanded.

The real interest rate

If households' disposable income decreases,then

If people expect an inflation rate of 3.3 percent,and the real interest rate is 3 percent,the nominal interest rate equals (approximately)

A increase in disposable income ________.

At the beginning of the year,Tom's Tubes had a capital stock of 5 tube inflating machines.During the year,Tom scrapped 2 old machines and purchased 3 new machines.Tom's gross investment for the year totaled

The nominal interest rate approximately equals which of the following?

The crowding-out effect refers to

People expect an inflation rate of 5 percent and the real interest rate is positive.Consequently the nominal interest rate will be

Begin with the formula showing how households can divide their income.Then use this formula and the expenditure approach to GDP to show how investment is financed from three sources.

The expected profit from an investment will change with

Net investment equals

A decrease in the real interest rate leads to a the demand for loanable funds curve,and a decrease in the expected profit leads to a the demand for loanable funds curve.

The quantity of by households will be less .

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 the government's budget deficit increases and the Ricardo-Barro effect does not apply,

If the government runs a budget deficit,then

Which of the following is true? I. As the real interest rate increases,people increase the quantity they save. II. The supply of loanable funds curve is downward sloping. III. As disposable income increases,the supply of loanable funds curve becomes steeper.

In the loanable funds market,what variable changes to eliminate a shortage of loanable funds and how is the shortage eliminated?

A share of Apple stock has a price of $430 and gives $43 of Apple profit to its owner. The interest rate on this share

An increase in the real interest rate ________ the quantity of loanable funds supplied and ________ the quantity of loanable funds demanded.

The real interest rate

If households' disposable income decreases,then

If people expect an inflation rate of 3.3 percent,and the real interest rate is 3 percent,the nominal interest rate equals (approximately)

A increase in disposable income ________.

At the beginning of the year,Tom's Tubes had a capital stock of 5 tube inflating machines.During the year,Tom scrapped 2 old machines and purchased 3 new machines.Tom's gross investment for the year totaled

The nominal interest rate approximately equals which of the following?

The crowding-out effect refers to

People expect an inflation rate of 5 percent and the real interest rate is positive.Consequently the nominal interest rate will be

Begin with the formula showing how households can divide their income.Then use this formula and the expenditure approach to GDP to show how investment is financed from three sources.

The expected profit from an investment will change with

Net investment equals

A decrease in the real interest rate leads to a ________ the demand for loanable funds curve,and a decrease in the expected profit leads to a ________ the demand for loanable funds curve.

The quantity of ________ by households will be less ________.

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

An increase in the real interest rate the quantity of loanable funds supplied and the quantity of loanable funds demanded.

A decrease in the real interest rate leads to a the demand for loanable funds curve,and a decrease in the expected profit leads to a the demand for loanable funds curve.

The quantity of by households will be less .