Question 1

Capitalist income (corporate profits, interest, and rent) has

Accepted Answer

A)  declined sharply since 1900 because of the growing strength of labor unions. 
B)  remained approximately constant since 1900. 
C)  increased significantly because of rising rents. 
D)  fallen since 1900 because of the declining importance of corporations. 
A)  declined sharply since 1900 because of the growing strength of labor unions. 
B)  remained approximately constant since 1900. 
C)  increased significantly because of rising rents. 
D)  fallen since 1900 because of the declining importance of corporations.

Question 2

Other things equal, an increase in the productivity of capital goods will

Accepted Answer

A)  increase the demand for loanable funds and decrease the equilibrium interest rate. 
B)  increase the demand for loanable funds and increase the equilibrium interest rate. 
C)  increase the supply of loanable funds and decrease the equilibrium interest rate. 
D)  increase the supply of loanable funds and increase the equilibrium interest rate. 
A)  increase the demand for loanable funds and decrease the equilibrium interest rate. 
B)  increase the demand for loanable funds and increase the equilibrium interest rate. 
C)  increase the supply of loanable funds and decrease the equilibrium interest rate. 
D)  increase the supply of loanable funds and increase the equilibrium interest rate.

Question 3

Other things equal, interest rates are

Accepted Answer

A)  higher on large loans than on small loans. 
B)  higher on loans with tax-exempt interest payments. 
C)  lower on less risky loans than on riskier loans. 
D)  lower on short-term loans than on long-term loans. 
A)  higher on large loans than on small loans. 
B)  higher on loans with tax-exempt interest payments. 
C)  lower on less risky loans than on riskier loans. 
D)  lower on short-term loans than on long-term loans.

Question 4

The equilibrium interest rate

Accepted Answer

A)  affects both the size of total output and its composition. 
B)  falls when the demand for loanable funds increases. 
C)  determines the composition of R&D spending but not its total amount. 
D)  increases when the expected rate of return on R&D spending falls. 
A)  affects both the size of total output and its composition. 
B)  falls when the demand for loanable funds increases. 
C)  determines the composition of R&D spending but not its total amount. 
D)  increases when the expected rate of return on R&D spending falls.

Question 5

As interest rates decrease, the

Accepted Answer

A)  cost of current relative to future consumption increases. 
B)  cost of current relative to future consumption decreases. 
C)  cost of current consumption relative to future consumption remains the same. 
D)  desire of many individuals to save increases. 
A)  cost of current relative to future consumption increases. 
B)  cost of current relative to future consumption decreases. 
C)  cost of current consumption relative to future consumption remains the same. 
D)  desire of many individuals to save increases.

Question 6

A decrease in the supply of loanable funds would tend to lower the interest rate.

Accepted Answer

A) True 
 B)False

Question 7

Some countries have negative nominal interest rates. Which of the following statements about this situation is not true?

Accepted Answer

A)  A saver or lender will get back less than the amount she invested. 
B)  This is mostly a result of deliberate central bank policies. 
C)  Consumers are expected to save more and consume less. 
D)  Consumers are expected to borrow more and spend more. 
A)  A saver or lender will get back less than the amount she invested. 
B)  This is mostly a result of deliberate central bank policies. 
C)  Consumers are expected to save more and consume less. 
D)  Consumers are expected to borrow more and spend more.

Question 8

Other things equal, the shorter the loan period and the larger the loan size, the higher is the interest rate charged by the lender.

Accepted Answer

A) True 
 B)False

Question 9

Economic profit is most closely associated with

Accepted Answer

A)  the process of saving and investing. 
B)  monopoly, innovation, and uninsurable risks. 
C)  long-run competitive equilibrium. 
D)  a static economy. 
A)  the process of saving and investing. 
B)  monopoly, innovation, and uninsurable risks. 
C)  long-run competitive equilibrium. 
D)  a static economy.

Question 10

The largest single share of all income earned by Americans consists of

Accepted Answer

A)  wages and salaries. 
B)  interest. 
C)  rents. 
D)  corporate profits. 
A)  wages and salaries. 
B)  interest. 
C)  rents. 
D)  corporate profits.

Question 11

An increase in the expected rates of return on investments would most likely increase the supply of loanable funds.

Accepted Answer

A) True 
 B)False

Question 12

Landowners will not receive any rent so long as

Accepted Answer

A)  there is any tax on land. 
B)  the supply and demand curves for land intersect. 
C)  the supply curve of land is perfectly inelastic. 
D)  the supply curve lies entirely to the right of the demand curve. 
A)  there is any tax on land. 
B)  the supply and demand curves for land intersect. 
C)  the supply curve of land is perfectly inelastic. 
D)  the supply curve lies entirely to the right of the demand curve.

Question 13

Rent performs an incentive function, but no rationing function.

Accepted Answer

A) True 
 B)False

Question 14

In making an investment decision, a business firm is most interested in the

Accepted Answer

A)  nominal interest rate. 
B)  real interest rate. 
C)  nominal interest rate minus the real interest rate. 
D)  future supply of loanable funds. 
A)  nominal interest rate. 
B)  real interest rate. 
C)  nominal interest rate minus the real interest rate. 
D)  future supply of loanable funds.

Question 15

The supply curve of loanable funds is upsloping because

Accepted Answer

A)  businesses find more investments to be profitable at low interest rates than at high interest rates. 
B)  government budget deficits vary inversely with the equilibrium interest rate. 
C)  households are willing to save more at high interest rates than they are at low interest rates. 
D)  banks lend more at low interest rates than they do at high interest rates. 
A)  businesses find more investments to be profitable at low interest rates than at high interest rates. 
B)  government budget deficits vary inversely with the equilibrium interest rate. 
C)  households are willing to save more at high interest rates than they are at low interest rates. 
D)  banks lend more at low interest rates than they do at high interest rates.

Question 16

A firm will undertake investments as long as the expected rate of return is less than the interest rate.

Accepted Answer

A) True 
 B)False

Question 17

Money is an economic resource referred to as capital.

Accepted Answer

A) True 
 B)False

Question 18

The value today of a specific sum of money to be received in the future is referred to as

Accepted Answer

A)  the future value of that sum of money. 
B)  the present value of that sum of money. 
C)  compound interest. 
D)  the time-value of money. 
A)  the future value of that sum of money. 
B)  the present value of that sum of money. 
C)  compound interest. 
D)  the time-value of money.

Question 19

The demand for land is

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  upsloping. 
D)  downsloping. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  upsloping. 
D)  downsloping.

Question 20

Which of the following is correct?

Accepted Answer

A)  Money is a resource, but real capital is not. 
B)  Real capital is a resource, but money is not. 
C)  Neither money nor real capital is a resource. 
D)  Both money and real capital are resources. 
A)  Money is a resource, but real capital is not. 
B)  Real capital is a resource, but money is not. 
C)  Neither money nor real capital is a resource. 
D)  Both money and real capital are resources.

Exam 18: Rent, Interest, and Profit

Capitalist income (corporate profits, interest, and rent) has

Other things equal, an increase in the productivity of capital goods will

Other things equal, interest rates are

The equilibrium interest rate

As interest rates decrease, the

A decrease in the supply of loanable funds would tend to lower the interest rate.

Some countries have negative nominal interest rates. Which of the following statements about this situation is not true?

Other things equal, the shorter the loan period and the larger the loan size, the higher is the interest rate charged by the lender.

Economic profit is most closely associated with

The largest single share of all income earned by Americans consists of

An increase in the expected rates of return on investments would most likely increase the supply of loanable funds.

Landowners will not receive any rent so long as

Rent performs an incentive function, but no rationing function.

In making an investment decision, a business firm is most interested in the

The supply curve of loanable funds is upsloping because

A firm will undertake investments as long as the expected rate of return is less than the interest rate.

Money is an economic resource referred to as capital.

The value today of a specific sum of money to be received in the future is referred to as

The demand for land is

Which of the following is correct?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters