Question 1

For a given future value, the higher the interest rate is, the higher the present value will be.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a source of loanable funds?

Accepted Answer

A)  the saving of households 
B)  business saving 
C)  commercial bank lending 
D)  government budget deficits 
A)  the saving of households 
B)  business saving 
C)  commercial bank lending 
D)  government budget deficits

Question 3

In his book Progress and Poverty, Henry George argued that

Accepted Answer

A)  poverty is associated with the personal characteristics of individuals and therefore cannot be remedied by government antipoverty programs. 
B)  economic rent could be heavily taxed without impairing the supply of land or, therefore, the productive capacity of the economy. 
C)  rents should not be taxed, because rental income is the basic source of saving, which ultimately permits a high level of investment and economic growth. 
D)  taxes on rents are undesirable because they have a severe disincentive effect on landlords. 
A)  poverty is associated with the personal characteristics of individuals and therefore cannot be remedied by government antipoverty programs. 
B)  economic rent could be heavily taxed without impairing the supply of land or, therefore, the productive capacity of the economy. 
C)  rents should not be taxed, because rental income is the basic source of saving, which ultimately permits a high level of investment and economic growth. 
D)  taxes on rents are undesirable because they have a severe disincentive effect on landlords.

Question 4

Which of the following resource payments is considered by economists as surplus payments?

Accepted Answer

A)  wages for labor 
B)  rent for land 
C)  interest for capital 
D)  profits for entrepreneurship 
A)  wages for labor 
B)  rent for land 
C)  interest for capital 
D)  profits for entrepreneurship

Question 5

Defined narrowly as wages and salaries, labor's share of the national income is about

Accepted Answer

A)  70 percent. 
B)  53 percent. 
C)  42 percent. 
D)  89 percent. 
A)  70 percent. 
B)  53 percent. 
C)  42 percent. 
D)  89 percent.

Question 6

The real interest rate can be estimated by

Accepted Answer

A)  subtracting the pure interest rate from the nominal interest rate. 
B)  dividing the nominal interest rate by the consumer price index. 
C)  subtracting the nominal interest rate from the rate of inflation. 
D)  subtracting the rate of inflation from the nominal interest rate. 
A)  subtracting the pure interest rate from the nominal interest rate. 
B)  dividing the nominal interest rate by the consumer price index. 
C)  subtracting the nominal interest rate from the rate of inflation. 
D)  subtracting the rate of inflation from the nominal interest rate.

Question 7

The pure rate of interest is approximated by the

Accepted Answer

A)  rate that savings and loan associations charge on mortgage loans. 
B)  rate charged consumers by credit card companies. 
C)  rate paid on long-term government bonds. 
D)  announced rate at which commercial banks make business loans. 
A)  rate that savings and loan associations charge on mortgage loans. 
B)  rate charged consumers by credit card companies. 
C)  rate paid on long-term government bonds. 
D)  announced rate at which commercial banks make business loans.

Question 8

Effective usury laws cause

Accepted Answer

A)  a surplus in the market for loanable funds. 
B)  the quantity of loanable funds demanded to be brought into balance with the quantity supplied. 
C)  the quantity of loanable funds demanded to exceed the quantity supplied. 
D)  the quantity of loanable funds supplied to exceed the quantity demanded. 
A)  a surplus in the market for loanable funds. 
B)  the quantity of loanable funds demanded to be brought into balance with the quantity supplied. 
C)  the quantity of loanable funds demanded to exceed the quantity supplied. 
D)  the quantity of loanable funds supplied to exceed the quantity demanded.

Question 9

Effective usury laws cause

Accepted Answer

A)  a surplus of money in money markets. 
B)  the quantity of money demanded to be brought into balance with the quantity supplied. 
C)  the quantity of money supplied to exceed the quantity demanded. 
D)  a shortage of money in money markets. 
A)  a surplus of money in money markets. 
B)  the quantity of money demanded to be brought into balance with the quantity supplied. 
C)  the quantity of money supplied to exceed the quantity demanded. 
D)  a shortage of money in money markets.

Question 10

The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years from now.

Accepted Answer

A) True 
 B)False

Question 11

Labor's share of income earned by Americans is smaller than the share of capital.

Accepted Answer

A) True 
 B)False

Question 12

In time-value of money calculations, discounting is the reverse of compounding.

Accepted Answer

A) True 
 B)False

Question 13

When the inflation rate is 4 percent and the nominal interest rate on long-term government bonds is 8 percent, the real interest rate is 12 percent.

Accepted Answer

A) True 
 B)False

Question 14

The demand for farmland will increase if

Accepted Answer

A)  the demand for food decreases. 
B)  technological advances make land more productive. 
C)  the price of farm labor increases and the output effect exceeds the substitution effect. 
D)  the supply of farmland increases. 
A)  the demand for food decreases. 
B)  technological advances make land more productive. 
C)  the price of farm labor increases and the output effect exceeds the substitution effect. 
D)  the supply of farmland increases.

Question 15

If the payment to an input is pure economic rent, then reducing that payment will

Accepted Answer

A)  not influence the availability of the input. 
B)  increase the quantity supplied of the input. 
C)  decrease the quantity supplied of the input. 
D)  decrease the demand for the input. 
A)  not influence the availability of the input. 
B)  increase the quantity supplied of the input. 
C)  decrease the quantity supplied of the input. 
D)  decrease the demand for the input.

Question 16

Which of the following is considered to be an economic resource?

Accepted Answer

A)  rent 
B)  money 
C)  interest 
D)  capital 
A)  rent 
B)  money 
C)  interest 
D)  capital

Question 17

The real rate of interest is the interest rate

Accepted Answer

A)  charged on long-term government bonds. 
B)  associated with a riskless loan. 
C)  that large commercial banks charge their best customers. 
D)  after adjustment has been made for inflation. 
A)  charged on long-term government bonds. 
B)  associated with a riskless loan. 
C)  that large commercial banks charge their best customers. 
D)  after adjustment has been made for inflation.

Question 18

The prices paid to a productive resource usually perform an incentive function except with what resource?

Accepted Answer

A)  land 
B)  labor 
C)  capital 
D)  entrepreneurial ability 
A)  land 
B)  labor 
C)  capital 
D)  entrepreneurial ability

Question 19

Which of the following represents an uninsurable risk to a business firm?

Accepted Answer

A)  the possibility that its warehouse will burn down 
B)  the possibility that several of its workers will be injured at work 
C)  the possibility that an adverse change in consumer tastes will decrease the demand for the firm's product 
D)  the possibility that a tornado will damage the plant and stop production for a month 
A)  the possibility that its warehouse will burn down 
B)  the possibility that several of its workers will be injured at work 
C)  the possibility that an adverse change in consumer tastes will decrease the demand for the firm's product 
D)  the possibility that a tornado will damage the plant and stop production for a month

Question 20

If the inflation rate is 10 percent, what is a bank's real rate of return on a loan of $100 at 10 percent interest?

Accepted Answer

A)  $100 
B)  $10 
C)  10 percent 
D)  0 percent 
A)  $100 
B)  $10 
C)  10 percent 
D)  0 percent

Exam 18: Rent, Interest, and Profit

For a given future value, the higher the interest rate is, the higher the present value will be.

Which of the following is not a source of loanable funds?

In his book Progress and Poverty, Henry George argued that

Which of the following resource payments is considered by economists as surplus payments?

Defined narrowly as wages and salaries, labor's share of the national income is about

The real interest rate can be estimated by

The pure rate of interest is approximated by the

Effective usury laws cause

Effective usury laws cause

The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years from now.

Labor's share of income earned by Americans is smaller than the share of capital.

In time-value of money calculations, discounting is the reverse of compounding.

When the inflation rate is 4 percent and the nominal interest rate on long-term government bonds is 8 percent, the real interest rate is 12 percent.

The demand for farmland will increase if

If the payment to an input is pure economic rent, then reducing that payment will

Which of the following is considered to be an economic resource?

The real rate of interest is the interest rate

The prices paid to a productive resource usually perform an incentive function except with what resource?

Which of the following represents an uninsurable risk to a business firm?

If the inflation rate is 10 percent, what is a bank's real rate of return on a loan of $100 at 10 percent interest?

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