Question 1

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 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

The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received.

Accepted Answer

A) True 
 B)False

Question 4

If Congress were to pass a law exempting interest on saving from taxation,the:

Accepted Answer

A)  supply of loanable funds would decrease and the equilibrium interest rate rise. 
B)  supply of loanable funds would increase and the equilibrium interest rate fall. 
C)  demand for loanable funds would increase and the equilibrium interest rate rise. 
D)  equilibrium interest rate would be unaffected. 
A)  supply of loanable funds would decrease and the equilibrium interest rate rise. 
B)  supply of loanable funds would increase and the equilibrium interest rate fall. 
C)  demand for loanable funds would increase and the equilibrium interest rate rise. 
D)  equilibrium interest rate would be unaffected.

Question 5

Interest is the:

Accepted Answer

A)  price paid for the use of money. 
B)  opportunity cost of time. 
C)  expectation of a future return on investment. 
D)  reward for consuming rather than saving. 
A)  price paid for the use of money. 
B)  opportunity cost of time. 
C)  expectation of a future return on investment. 
D)  reward for consuming rather than saving.

Question 6

Which of the following is not a component of the demand for loanable funds?

Accepted Answer

A)  Household purchases of housing and durable consumer goods. 
B)  Business purchases of capital goods. 
C)  Government financing of the public debt. 
D)  Household saving. 
A)  Household purchases of housing and durable consumer goods. 
B)  Business purchases of capital goods. 
C)  Government financing of the public debt. 
D)  Household saving.

Question 7

Demand is the active and supply the passive determinant of land rent.

Accepted Answer

A) True 
 B)False

Question 8

For all practical purposes,the supply of land is:

Accepted Answer

A)  almost perfectly inelastic. 
B)  negatively sloped. 
C)  relatively elastic. 
D)  perfectly elastic. 
A)  almost perfectly inelastic. 
B)  negatively sloped. 
C)  relatively elastic. 
D)  perfectly elastic.

Question 9

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 10

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 11

The XYZ Corporation can make a real (inflation-adjusted)return on an investment of 9 percent.The nominal rate of interest is 13 percent and the rate of inflation is 7 percent.We can conclude that the:

Accepted Answer

A)  investment will be profitable. 
B)  investment will be unprofitable. 
C)  real rate of interest is 4 percent. 
D)  real rate of interest is 2 percent. 
A)  investment will be profitable. 
B)  investment will be unprofitable. 
C)  real rate of interest is 4 percent. 
D)  real rate of interest is 2 percent.

Question 12

Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate.The loan amount is:

Accepted Answer

A)  $400. 
B)  $1,600. 
C)  $160. 
D)  $85. 
A)  $400. 
B)  $1,600. 
C)  $160. 
D)  $85.

Question 13

(Consider This)The story about economist Irving Fisher's conversation with his masseuse illustrates that interest payments arise because of:

Accepted Answer

A)  the possibility of inflation. 
B)  the reality of credit risk. 
C)  imperfect information about the future. 
D)  the time-value of money. 
A)  the possibility of inflation. 
B)  the reality of credit risk. 
C)  imperfect information about the future. 
D)  the time-value of money.

Question 14

The economist who advocated a single tax on land was:

Accepted Answer

A)  Adam Smith. 
B)  John Maynard Keynes. 
C)  Henry George. 
D)  Milton Friedman. 
A)  Adam Smith. 
B)  John Maynard Keynes. 
C)  Henry George. 
D)  Milton Friedman.

Question 15

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 16

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 17

The supply of loanable funds is perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 18

The demand for loanable funds is downsloping:

Accepted Answer

A)  because businesses find that more investments are profitable at low interest rates than at high interest rates. 
B)  because households are willing to save more at high interest rates than at low interest rates. 
C)  only when the nominal interest rate exceeds the real interest rate. 
D)  because the amount of profitable business investment varies directly with the interest rate. 
A)  because businesses find that more investments are profitable at low interest rates than at high interest rates. 
B)  because households are willing to save more at high interest rates than at low interest rates. 
C)  only when the nominal interest rate exceeds the real interest rate. 
D)  because the amount of profitable business investment varies directly with the interest rate.

Question 19

Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan.The interest rates on the two loans are:

Accepted Answer

A)  14 percent and 20 percent,respectively. 
B)  14 percent on both loans. 
C)  18.8 percent on both loans. 
D)  1.4 percent and 11.8 percent,respectively. 
A)  14 percent and 20 percent,respectively. 
B)  14 percent on both loans. 
C)  18.8 percent on both loans. 
D)  1.4 percent and 11.8 percent,respectively.

Question 20

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.

Exam 17: Rent Interest and Profit

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

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

The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received.

If Congress were to pass a law exempting interest on saving from taxation,the:

Interest is the:

Which of the following is not a component of the demand for loanable funds?

Demand is the active and supply the passive determinant of land rent.

For all practical purposes,the supply of land is:

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

Economic profit is most closely associated with:

The XYZ Corporation can make a real (inflation-adjusted)return on an investment of 9 percent.The nominal rate of interest is 13 percent and the rate of inflation is 7 percent.We can conclude that the:

Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate.The loan amount is:

(Consider This)The story about economist Irving Fisher's conversation with his masseuse illustrates that interest payments arise because of:

The economist who advocated a single tax on land was:

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

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

The supply of loanable funds is perfectly elastic.

The demand for loanable funds is downsloping:

Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan.The interest rates on the two loans are:

The demand for farmland will increase if:

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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

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