Question 1

Other things remaining the same, the greater the expected profit

Accepted Answer

A)  the less the amount of investment. 
B)  the greater the amount of investment. 
C)  the steeper is the investment demand curve. 
D)  the flatter is the investment demand curve. 
A)  the less the amount of investment. 
B)  the greater the amount of investment. 
C)  the steeper is the investment demand curve. 
D)  the flatter is the investment demand curve.

Question 2

Which of the following items are considered physical capital?
I.shares of Ford stock traded on the New York Stock Exchange
II.the Taco Bell store nearest you
III.the rental cars owned by Hertz Rental-A-Car
IV.the salaries paid to Intel executives

Accepted Answer

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

Question 3

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 4

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 5

U)S. investment is financed from

Accepted Answer

A)  private saving, government budget surpluses, and borrowing from the rest of the world. 
B)  private saving, government budget deficits, and borrowing from the rest of the world. 
C)  private borrowing, government budget deficits, and lending to the rest of the world. 
D)  private saving and borrowing from the rest of the world only. 
A)  private saving, government budget surpluses, and borrowing from the rest of the world. 
B)  private saving, government budget deficits, and borrowing from the rest of the world. 
C)  private borrowing, government budget deficits, and lending to the rest of the world. 
D)  private saving and borrowing from the rest of the world only.

Question 6

The Ricardo-Barro effect says that

Accepted Answer

A)  government budget deficits have no crowding out effect because taxpayers increase their savings to match the quantity of loanable funds demanded by the government. 
B)  government budget deficits crowd out private investment and thereby lower the real interest rate. 
C)  government budget deficits resulting from an increase in government expenditure have no effect on investment but government deficits resulting from a decrease in taxes crowd out investment. 
D)  government budget deficits cause households to save more in anticipation of higher taxes, which causes higher real interest rates. 
A)  government budget deficits have no crowding out effect because taxpayers increase their savings to match the quantity of loanable funds demanded by the government. 
B)  government budget deficits crowd out private investment and thereby lower the real interest rate. 
C)  government budget deficits resulting from an increase in government expenditure have no effect on investment but government deficits resulting from a decrease in taxes crowd out investment. 
D)  government budget deficits cause households to save more in anticipation of higher taxes, which causes higher real interest rates.

Question 7

The demand for loanable funds curve is

Accepted Answer

A)  downward sloping when plotted against the real interest rate. 
B)  vertical at the full employment level of investment. 
C)  constant at the maximum expected profit rate. 
D)  upward sloping when plotted against the real interest rate. 
A)  downward sloping when plotted against the real interest rate. 
B)  vertical at the full employment level of investment. 
C)  constant at the maximum expected profit rate. 
D)  upward sloping when plotted against the real interest rate.

Question 8

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 9

Suppose Country A had net taxes of $30 million and government expenditures of $35 million. In addition, household saving in Country A totaled $5 million while consumption was $80 million. The government of Country A is running a budget ________ and national saving is ________ million.

Accepted Answer

A)  surplus; $5 
B)  deficit; -$5 
C)  deficit; $0 
D)  surplus; $25 
A)  surplus; $5 
B)  deficit; -$5 
C)  deficit; $0 
D)  surplus; $25

Question 10

Explain how each of the following events affect the supply of loanable funds curve:
a)The economy is in a recession so people's disposable income is lower.
b)The stock market is booming so the people's wealth is higher.
c)Fewer college graduates are finding jobs so expected future income is lower.
d)The real interest rate increases.

Accepted Answer

a)Disposable income is lower, so saving

Question 11

-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF?. 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 SLF?. 
C)  The supply of loanable funds curve would shift rightward to a curve such as SLF?. 
D)  The supply of loanable funds curve would shift leftward to a curve such as SLF?. 
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 SLF?. 
C)  The supply of loanable funds curve would shift rightward to a curve such as SLF?. 
D)  The supply of loanable funds curve would shift leftward to a curve such as SLF?.

Question 12

When the inflation rate is zero, the

Accepted Answer

A)  real interest rate is greater than the nominal interest rate. 
B)  real interest rate is less than the nominal interest rate. 
C)  nominal interest rate is zero. 
D)  real interest rate equals the nominal interest rate. 
A)  real interest rate is greater than the nominal interest rate. 
B)  real interest rate is less than the nominal interest rate. 
C)  nominal interest rate is zero. 
D)  real interest rate equals the nominal interest rate.

Question 13

-In the above figure, the initial supply of loanable funds curve is SLF? and the demand for loanable funds investment curve is DLF?. An increase in the real interest rate to 7 percent could be caused by

Accepted Answer

A)  an increase in investment demand. 
B)  a decrease in the expected profit. 
C)  an increase in people's disposable incomes. 
D)  an expansion that increased both saving and investment by the same amount. 
A)  an increase in investment demand. 
B)  a decrease in the expected profit. 
C)  an increase in people's disposable incomes. 
D)  an expansion that increased both saving and investment by the same amount.

Question 14

Technological progress that increases the expected profit shifts the demand for loanable funds curve

Accepted Answer

A)  leftward and reduces the real interest rate. 
B)  rightward and increases the real interest rate. 
C)  rightward and reduces the real interest rate. 
D)  leftward and increases the real interest rate. 
A)  leftward and reduces the real interest rate. 
B)  rightward and increases the real interest rate. 
C)  rightward and reduces the real interest rate. 
D)  leftward and increases the real interest rate.

Question 15

What are the factors that change investment demand and shift the demand for loanable funds curve?

Accepted Answer

Investment demand changes with the chang

Question 16

The demand for loanable funds curve shows that as the ________ interest rate increases, there will be ________ the curve.

Accepted Answer

A)  nominal; a rightward shift in 
B)  real; a rightward shift in 
C)  nominal; movement down along 
D)  real; movement up along. 
A)  nominal; a rightward shift in 
B)  real; a rightward shift in 
C)  nominal; movement down along 
D)  real; movement up along.

Question 17

________ increases households' saving.

Accepted Answer

A)  A decrease in the real interest rate 
B)  A tax cut that increases disposable income 
C)  Higher expected future income 
D)  A stock market boom that increases the purchasing power of households' wealth 
A)  A decrease in the real interest rate 
B)  A tax cut that increases disposable income 
C)  Higher expected future income 
D)  A stock market boom that increases the purchasing power of households' wealth

Question 18

The ________ the expected profit, the greater is the ________.

Accepted Answer

A)  lower; investment demand 
B)  higher; investment demand 
C)  lower; capital stock 
D)  None of the above answers is correct 
A)  lower; investment demand 
B)  higher; investment demand 
C)  lower; capital stock 
D)  None of the above answers is correct

Question 19

When a government has a budget surplus, the surplus

Accepted Answer

A)  helps finance investment. 
B)  crowds-out private saving. 
C)  must be subtracted from private saving to get total saving. 
D)  increases the world real interest rate. 
A)  helps finance investment. 
B)  crowds-out private saving. 
C)  must be subtracted from private saving to get total saving. 
D)  increases the world real interest rate.

Question 20

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.

Other things remaining the same, the greater the expected profit

Which of the following items are considered physical capital? I.shares of Ford stock traded on the New York Stock Exchange II.the Taco Bell store nearest you III.the rental cars owned by Hertz Rental-A-Car IV.the salaries paid to Intel executives

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

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

U)S. investment is financed from

The Ricardo-Barro effect says that

The demand for loanable funds curve is

The expected profit from an investment will change with

Suppose Country A had net taxes of $30 million and government expenditures of $35 million. In addition, household saving in Country A totaled $5 million while consumption was $80 million. The government of Country A is running a budget and national saving is million.

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

When the inflation rate is zero, the

-In the above figure, the initial supply of loanable funds curve is SLF? and the demand for loanable funds investment curve is DLF?. An increase in the real interest rate to 7 percent could be caused by

Technological progress that increases the expected profit shifts the demand for loanable funds curve

What are the factors that change investment demand and shift the demand for loanable funds curve?

The demand for loanable funds curve shows that as the interest rate increases, there will be the curve.

________ increases households' saving.

The the expected profit, the greater is the .

When a government has a budget surplus, the surplus

If the government runs a budget deficit, then

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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 7: Finance, Saving, and Investment

Other things remaining the same, the greater the expected profit

Which of the following items are considered physical capital? I.shares of Ford stock traded on the New York Stock Exchange II.the Taco Bell store nearest you III.the rental cars owned by Hertz Rental-A-Car IV.the salaries paid to Intel executives

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

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

U)S. investment is financed from

The Ricardo-Barro effect says that

The demand for loanable funds curve is

The expected profit from an investment will change with

Suppose Country A had net taxes of $30 million and government expenditures of $35 million. In addition, household saving in Country A totaled $5 million while consumption was $80 million. The government of Country A is running a budget ________ and national saving is ________ million.

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

When the inflation rate is zero, the

-In the above figure, the initial supply of loanable funds curve is SLF? and the demand for loanable funds investment curve is DLF?. An increase in the real interest rate to 7 percent could be caused by

Technological progress that increases the expected profit shifts the demand for loanable funds curve

What are the factors that change investment demand and shift the demand for loanable funds curve?

The demand for loanable funds curve shows that as the ________ interest rate increases, there will be ________ the curve.

________ increases households' saving.

The ________ the expected profit, the greater is the ________.

When a government has a budget surplus, the surplus

If the government runs a budget deficit, then

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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Suppose Country A had net taxes of $30 million and government expenditures of $35 million. In addition, household saving in Country A totaled $5 million while consumption was $80 million. The government of Country A is running a budget and national saving is million.

The demand for loanable funds curve shows that as the interest rate increases, there will be the curve.

The the expected profit, the greater is the .