Question 1

The difference between the nominal rate of interest and the real rate of interest is the

Accepted Answer

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

Question 2

The reward investors receive for accepting the probability that they will not be fully paid as agreed or as anticipated is called the

Accepted Answer

A) risk adjustment. 
B) risk premium. 
C) interest rate. 
D) real interest rate. 
A) risk adjustment. 
B) risk premium. 
C) interest rate. 
D) real interest rate.

Question 3

If a person is going to borrow $360,000 for a home and pay it off in monthly payments of $3,159.26 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 4

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

Accepted Answer

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

Question 5

If a person is going to borrow $30,000 for a car and pay it off in monthly payments of $500 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 6

The possibility that an investor will not receive full payment is called

Accepted Answer

A) an advance. 
B) credit. 
C) the index problem. 
D) risk. 
A) an advance. 
B) credit. 
C) the index problem. 
D) risk.

Question 7

In the market for money the demand curve is made up of

Accepted Answer

A) borrowers. 
B) savers. 
C) neither borrowers nor savers. 
D) a combination of borrowers and savers. 
A) borrowers. 
B) savers. 
C) neither borrowers nor savers. 
D) a combination of borrowers and savers.

Question 8

If people (who used to neither borrow nor save)are now saving for their retirement 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 9

Suppose you were given $100,000 by your grandparents and told that you could spend half of it but were to invest the other half to give your own grandchild a gift. What concept would you use to figure out how much your present to your grandchild would be worth in 40 years?

Accepted Answer

A) Present Value 
B) Future Value 
C) The Rule of 72 
D) Internal Rate of Return 
A) Present Value 
B) Future Value 
C) The Rule of 72 
D) Internal Rate of Return

Question 10

When evaluating whether or not to make an investment one should focus on the _____ because doing so takes into account anticipated inflation.

Accepted Answer

A) nominal interest rate 
B) exchange rate 
C) real interest rate 
D) junk bond rate 
A) nominal interest rate 
B) exchange rate 
C) real interest rate 
D) junk bond rate

Question 11

If your broker tells you that a trust to which you are a beneficiary has changed and instead of getting $5000 per year starting next year you will be getting $6000 per year starting next year the present value to you has

Accepted Answer

A) fallen. 
B) risen. 
C) remained unchanged. 
D) necessarily become more predictable. 
A) fallen. 
B) risen. 
C) remained unchanged. 
D) necessarily become more predictable.

Question 12

In a supply and demand model for the market for money, we typically use the _____ to look at borrowers' behavior.

Accepted Answer

A) the demand curve 
B) the supply curve 
C) the production possibilities frontier 
D) the surplus curve 
A) the demand curve 
B) the supply curve 
C) the production possibilities frontier 
D) the surplus curve

Question 13

If a person is going to borrow $30,000 for a car and pay it off with a constant mortgage payment every month for 5 years, what do you know about their car payment (if the interest rate is positive)?

Accepted Answer

A) Nothing. 
B) The payment is more than $500 per month. 
C) The payment is exactly than $500 per month. 
D) The payment is less than $500 per month. 
A) Nothing. 
B) The payment is more than $500 per month. 
C) The payment is exactly than $500 per month. 
D) The payment is less than $500 per month.

Question 14

The relationship between the rate of return earned on a bond and the length of time until the bond matures is called the

Accepted Answer

A) interest rate. 
B) real interest rate. 
C) calendar. 
D) yield curve. 
A) interest rate. 
B) real interest rate. 
C) calendar. 
D) yield curve.

Question 15

If a business makes the determination that an investment makes sense at the current interest rate but before they can act the interest rates rises

Accepted Answer

A) they will have to recalculate whether it still makes sense. 
B) it will only make the situation better so they will clearly make the investment. 
C) it will cause them to not make the investment regardless of the increase. 
D) they will go ahead with the investment because interest rates have nothing to do with whether an investment makes sense. 
A) they will have to recalculate whether it still makes sense. 
B) it will only make the situation better so they will clearly make the investment. 
C) it will cause them to not make the investment regardless of the increase. 
D) they will go ahead with the investment because interest rates have nothing to do with whether an investment makes sense.

Question 16

A typical firm that needs operating capital has

Accepted Answer

A) constantly increasing income. 
B) seasonal income. 
C) constantly decreasing income. 
D) unpredictable income. 
A) constantly increasing income. 
B) seasonal income. 
C) constantly decreasing income. 
D) unpredictable income.

Question 17

The compensation savers receive for waiting on their consumption is the

Accepted Answer

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

Question 18

Using the Rule of 72, how long will it take something growing at 1% per year to double

Accepted Answer

A) 100 years 
B) 72 years 
C) 50 years 
D) 720 years 
A) 100 years 
B) 72 years 
C) 50 years 
D) 720 years

Question 19

When evaluating a business decision, an economist will often resort to the use of present value because

Accepted Answer

A) the profits may not be large enough to warrant the time and attention of the investor. 
B) the investment occurs in one time period and the profits in another. 
C) the investment is often in one currency and the profits in another. 
D) the investment is often under one set of managers and the profits under another. 
A) the profits may not be large enough to warrant the time and attention of the investor. 
B) the investment occurs in one time period and the profits in another. 
C) the investment is often in one currency and the profits in another. 
D) the investment is often under one set of managers and the profits under another.

Question 20

If a person is going to pay $500 per month every month for 5 years, what do you know about their car loan (if the interest rate is positive)?

Accepted Answer

A) Nothing. 
B) The loan amount was more than $30,000. 
C) The loan amount was exactly $30,000. 
D) The loan amount was less than $30,000. 
A) Nothing. 
B) The loan amount was more than $30,000. 
C) The loan amount was exactly $30,000. 
D) The loan amount was less than $30,000.

Exam 7: Interest Rates and Present Value

The difference between the nominal rate of interest and the real rate of interest is the

The reward investors receive for accepting the probability that they will not be fully paid as agreed or as anticipated is called the

If a person is going to borrow $360,000 for a home and pay it off in monthly payments of $3,159.26 for 30 years the internal rate of return is

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

If a person is going to borrow $30,000 for a car and pay it off in monthly payments of $500 for 5 years the internal rate of return is

The possibility that an investor will not receive full payment is called

In the market for money the demand curve is made up of

If people (who used to neither borrow nor save)are now saving for their retirement then this will cause the equilibrium interest rate

Suppose you were given $100,000 by your grandparents and told that you could spend half of it but were to invest the other half to give your own grandchild a gift. What concept would you use to figure out how much your present to your grandchild would be worth in 40 years?

When evaluating whether or not to make an investment one should focus on the _____ because doing so takes into account anticipated inflation.

If your broker tells you that a trust to which you are a beneficiary has changed and instead of getting $5000 per year starting next year you will be getting $6000 per year starting next year the present value to you has

In a supply and demand model for the market for money, we typically use the _____ to look at borrowers' behavior.

If a person is going to borrow $30,000 for a car and pay it off with a constant mortgage payment every month for 5 years, what do you know about their car payment (if the interest rate is positive)?

The relationship between the rate of return earned on a bond and the length of time until the bond matures is called the

If a business makes the determination that an investment makes sense at the current interest rate but before they can act the interest rates rises

A typical firm that needs operating capital has

The compensation savers receive for waiting on their consumption is the

Using the Rule of 72, how long will it take something growing at 1% per year to double

When evaluating a business decision, an economist will often resort to the use of present value because

If a person is going to pay $500 per month every month for 5 years, what do you know about their car loan (if the interest rate is positive)?

Economics: the Study of Opportunity Cost

Supply and Demand

The Concept of Elasticity and Consumer and Producer Surplus

Firm Production, Cost, and Revenue

Perfect Competition, Monopoly, and Economic Versus Normal Profit

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

Aggregate Demand and Aggregate Supply

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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