Question 1

If the interest rate is 10%, the present value of $100 to be paid in two years is

Accepted Answer

A) $100/1.1. 
B) $100/1.12. 
C) $80. 
D) $121. 
A) $100/1.1. 
B) $100/1.12. 
C) $80. 
D) $121. B

Question 2

Suppose there is an increase in the confidence that workers have in their future employment and income. This will cause

Accepted Answer

A) an increase in borrowing which will decrease interest rates. 
B) an increase in saving which will decrease interest rates. 
C) an increase in borrowing which will increase interest rates. 
D) an increase in saving which will increase interest rates. 
A) an increase in borrowing which will decrease interest rates. 
B) an increase in saving which will decrease interest rates. 
C) an increase in borrowing which will increase interest rates. 
D) an increase in saving which will increase interest rates. C

Question 3

Firms need to borrow for operating purposes because they

Accepted Answer

A) need to pay for goods and services after they have sold them. 
B) need to pay for goods and services before they will have revenue from their sales. 
C) are always in debt. 
D) need constant bailouts. 
A) need to pay for goods and services after they have sold them. 
B) need to pay for goods and services before they will have revenue from their sales. 
C) are always in debt. 
D) need constant bailouts. B

Question 4

The interest-adjusted value of past payments is

Accepted Answer

A) intrinsic value. 
B) real value. 
C) present value. 
D) future value. 
A) intrinsic value. 
B) real value. 
C) present value. 
D) future value.

Question 5

If the interest rate is positive, the present value of $1000 to be received in ten years is

Accepted Answer

A) less than $1000. 
B) greater than $1000. 
C) equal to $1000. 
D) either greater than $1000 or less than $1000, depending upon the interest rate 
A) less than $1000. 
B) greater than $1000. 
C) equal to $1000. 
D) either greater than $1000 or less than $1000, depending upon the interest rate

Question 6

If the inflation rate is 3% and the nominal interest rate is 4%, then the real interest rate is around

Accepted Answer

A) 1%. 
B) 3%. 
C) 7%. 
D) 12%. 
A) 1%. 
B) 3%. 
C) 7%. 
D) 12%.

Question 7

A decrease in the confidence that car-buying consumers have in their future income will

Accepted Answer

A) increase the demand for borrowable money. 
B) decrease the demand for borrowable money. 
C) increase the supply of borrowable money. 
D) decrease the supply of borrowable money. 
A) increase the demand for borrowable money. 
B) decrease the demand for borrowable money. 
C) increase the supply of borrowable money. 
D) decrease the supply of borrowable money.

Question 8

If the inflation rate is 6% and the real interest rate is 4%, then the nominal interest rate is around

Accepted Answer

A) 2%. 
B) -2%. 
C) 6%. 
D) 10%. 
A) 2%. 
B) -2%. 
C) 6%. 
D) 10%.

Question 9

If a person is going to borrow $360,000 for a home and pay it off in monthly payments of $1,000 for 30 years the internal rate of return is

Accepted Answer

A) 0%. 
B) 5%. 
C) 10%. 
D) 15%. 
A) 0%. 
B) 5%. 
C) 10%. 
D) 15%.

Question 10

If payments of $1000 are to be received every year for 20 years and if the interest rate is positive, the present value of this stream will

Accepted Answer

A) exceed $1000x20 ($20,000). 
B) equal $1000x20 ($20,000) 
C) be less than $1000x20 ($20,000). 
D) increase as the interest rate increases. 
A) exceed $1000x20 ($20,000). 
B) equal $1000x20 ($20,000) 
C) be less than $1000x20 ($20,000). 
D) increase as the interest rate increases.

Question 11

The difference between nominal and real interest rates is that

Accepted Answer

A) real interest rates are almost always greater than nominal interest rates. 
B) real interest rates are what you get after having adjusted nominal rates for inflation. 
C) nominal interest rates are what lenders receive and real interest rates are what borrowers pay. 
D) nominal interest rates are what borrowers pay and real interest rates are what lenders receive. 
A) real interest rates are almost always greater than nominal interest rates. 
B) real interest rates are what you get after having adjusted nominal rates for inflation. 
C) nominal interest rates are what lenders receive and real interest rates are what borrowers pay. 
D) nominal interest rates are what borrowers pay and real interest rates are what lenders receive.

Question 12

If people (who used to neither borrow nor save)are now borrowing to put their kids through college then this will cause the equilibrium interest rate

Accepted Answer

A) to rise. 
B) to fall. 
C) to fluctuate wildly. 
D) to remain constant. 
A) to rise. 
B) to fall. 
C) to fluctuate wildly. 
D) to remain constant.

Question 13

If the inflation rate is 2% and the nominal interest rate is 1%, then the real interest rate is around

Accepted Answer

A) -1%. 
B) 1%. 
C) 2%. 
D) 3%. 
A) -1%. 
B) 1%. 
C) 2%. 
D) 3%.

Question 14

A 60 month car loan (where no down payment was made)with a 6% interest rate and a monthly payment of $500 would allow the borrower to buy a

Accepted Answer

A) $35,500 car. 
B) $30,000 car. 
C) $25,863 car. 
D) $28,200 car. 
A) $35,500 car. 
B) $30,000 car. 
C) $25,863 car. 
D) $28,200 car.

Question 15

Savers are motivated by the

Accepted Answer

A) nominal interest rate. 
B) real interest rate. 
C) expected rate of inflation. 
D) advertised interest rate. 
A) nominal interest rate. 
B) real interest rate. 
C) expected rate of inflation. 
D) advertised interest rate.

Question 16

In the market for loanable dollars, an increase in the profitability of investments overall will be revealed in

Accepted Answer

A) an increase in the supply of loanable dollars. 
B) an increase in the demand for loanable dollars. 
C) a decrease in the supply of loanable dollars. 
D) a decrease in the demand for loanable dollars. 
A) an increase in the supply of loanable dollars. 
B) an increase in the demand for loanable dollars. 
C) a decrease in the supply of loanable dollars. 
D) a decrease in the demand for loanable dollars.

Question 17

If a person is going to borrow $30,000 for a car and pay it off in monthly payments of $637.41 for 5 years the internal rate of return is

Accepted Answer

A) 0%. 
B) 5%. 
C) 10%. 
D) 15%. 
A) 0%. 
B) 5%. 
C) 10%. 
D) 15%.

Question 18

If you are anticipating having to pay $100,000 to a lender 10 years from now and the interest rate rises, the present value of this sum

Accepted Answer

A) falls. 
B) rises. 
C) remains unchanged. 
D) first rises, then falls. 
A) falls. 
B) rises. 
C) remains unchanged. 
D) first rises, then falls.

Question 19

If an investment (where the costs are incurred before then profits)makes sense when the interest rate on the borrowed money to pay for it is 10%

Accepted Answer

A) an increase in the interest rate will cause the investment to lose money. 
B) an increase in the interest rate will cause the investment to be less profitable, but it still may make money. 
C) a decrease in the interest rate will cause the investment to lose money. 
D) a decrease in the interest rate will cause the investment to be less profitable, but it still may make money. 
A) an increase in the interest rate will cause the investment to lose money. 
B) an increase in the interest rate will cause the investment to be less profitable, but it still may make money. 
C) a decrease in the interest rate will cause the investment to lose money. 
D) a decrease in the interest rate will cause the investment to be less profitable, but it still may make money.

Question 20

If you know that you can afford a $500 per month car payment for the next 48 months, the interest rate is positive and you have found a car dealer who will agree to a zero down payment you will

Accepted Answer

A) be able to afford a $25,000 car (which is more than $500x48). 
B) be able to afford a $24,000 car (which is exactly $500x48). 
C) be able to afford something less than a $24,000 car. 
D) be able to finance a more expensive car when the interest rate is high. 
A) be able to afford a $25,000 car (which is more than $500x48). 
B) be able to afford a $24,000 car (which is exactly $500x48). 
C) be able to afford something less than a $24,000 car. 
D) be able to finance a more expensive car when the interest rate is high.

Exam 7: Interest Rates and Present Value

If the interest rate is 10%, the present value of $100 to be paid in two years is

Suppose there is an increase in the confidence that workers have in their future employment and income. This will cause

Firms need to borrow for operating purposes because they

The interest-adjusted value of past payments is

If the interest rate is positive, the present value of $1000 to be received in ten years is

If the inflation rate is 3% and the nominal interest rate is 4%, then the real interest rate is around

A decrease in the confidence that car-buying consumers have in their future income will

If the inflation rate is 6% and the real interest rate is 4%, then the nominal interest rate is around

If a person is going to borrow $360,000 for a home and pay it off in monthly payments of $1,000 for 30 years the internal rate of return is

If payments of $1000 are to be received every year for 20 years and if the interest rate is positive, the present value of this stream will

The difference between nominal and real interest rates is that

If people (who used to neither borrow nor save)are now borrowing to put their kids through college then this will cause the equilibrium interest rate

If the inflation rate is 2% and the nominal interest rate is 1%, then the real interest rate is around

A 60 month car loan (where no down payment was made)with a 6% interest rate and a monthly payment of $500 would allow the borrower to buy a

Savers are motivated by the

In the market for loanable dollars, an increase in the profitability of investments overall will be revealed in

If a person is going to borrow $30,000 for a car and pay it off in monthly payments of $637.41 for 5 years the internal rate of return is

If you are anticipating having to pay $100,000 to a lender 10 years from now and the interest rate rises, the present value of this sum

If an investment (where the costs are incurred before then profits)makes sense when the interest rate on the borrowed money to pay for it is 10%

If you know that you can afford a $500 per month car payment for the next 48 months, the interest rate is positive and you have found a car dealer who will agree to a zero down payment you will

Economics: the Study of Opportunity Cost

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The Concept of Elasticity and Consumer and Producer Surplus

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Perfect Competition, Monopoly, and Economic Versus Normal Profit

Every Macroeconomic Word You Ever Heard: Gross Domestic Product, Inflation, Unemployment, Recession, Depression

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Fiscal Policy

Monetary Policy

Federal Spending

Federal Deficits, Surpluses, and the National Debt

The Housing Bubble

The Recession of 2007-2009: Causes and Policy Responses

Is Economic Stagnation the New Normal

Is the Fiscalsky Falling: An Examination of Unfunded Social Security, Medicare, and State and Local Pension Liabilities

International Trade: Does It Jeopardize American Jobs

International Finance and Exchange Rates

The European Debt Crisis

Economic Growth and Development

Nafta, Gatt, Wto: Are Trade Agreements Good for Us

The Line Between Legal and Illegal Goods

Natural Resources, the Environment, and Climate Change

Health Care

Government-Provided Health Insurance: Medicaid, Medicare, and the Child Health Insurance Program

The Economics of Prescription Drugs

So You Want to Be a Lawyer: Economics and the Law

The Economics of Crime

Antitrust

The Economics of Race and Discrimination

Income and Wealth Inequality

Farm Policy

Minimum Wage

Ticket Brokers and Ticket Scalping

Rent Control

Economics of K-12 Education

Economics of College and University Education

Poverty and Welfare

Head Start

Social Security

Personal Income Taxes

Energy Prices

If We Build It, Will They Come and Other Sports Questions

The Stock Market Crashes

Unions

Walmart: Always Low Prices and Low Wages- Always

The Economic Impact of Casino Gambling

The Economics of Terrorism

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