Question 1

When someone borrows to purchase capital goods, he is using someone else’s _____ to fund his _____.

Accepted Answer

The answer of When someone borrows to purchase capital goods,...

Question 2

A _____ does not engage in international trade in goods and services and it does not engage in international borrowing and lending.

Accepted Answer

The answer of A _____ does not engage in international...

Question 3

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit.What would happen to the interest rate?

Accepted Answer

A) It would decrease. 
B) It would increase. 
C) It would stay the same. 
D) It might do any of the above. 
A) It would decrease. 
B) It would increase. 
C) It would stay the same. 
D) It might do any of the above.

Question 4

A decrease in government spending and the enactment of an investment tax credit would definitely cause

Accepted Answer

A) the quantity of loanable funds traded to increase. 
B) the interest rate to increase. 
C) the quantity of loanable funds traded to decrease. 
D) the interest rate to decrease. 
A) the quantity of loanable funds traded to increase. 
B) the interest rate to increase. 
C) the quantity of loanable funds traded to decrease. 
D) the interest rate to decrease.

Question 5

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Accepted Answer

A) The supply of loanable funds would shift right. 
B) The demand for loanable funds would shift right. 
C) The supply of loanable funds would shift left. 
D) The demand for loanable funds would shift left. 
A) The supply of loanable funds would shift right. 
B) The demand for loanable funds would shift right. 
C) The supply of loanable funds would shift left. 
D) The demand for loanable funds would shift left.

Question 6

Robert buys bonds.Rachel buys a new truck for her landscaping business.Identify both as savers,investors,both,or neither.

Accepted Answer

Robert is

Question 7

Figure 26-2.The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves.
r   Q
-Refer to Figure 26-2.What is measured along the horizontal axis of the graph?

Accepted Answer

A) the quantity of loanable funds 
B) the size of the government budget deficit or surplus 
C) the real interest rate 
D) the nominal interest rate 
A) the quantity of loanable funds 
B) the size of the government budget deficit or surplus 
C) the real interest rate 
D) the nominal interest rate

Question 8

Figure 26-5.Figure 26-5 shows the loanable funds market for a closed economy.  
-Refer to Figure 26-5.Starting at point A,a change in tax laws that encouraged households to save more would likely cause

Accepted Answer

A) the quantity of loanable funds traded to increase to $125 and the interest rate fall to 5% (point 
D) . 
B) the quantity of loanable funds traded to increase to $125 and the interest rate to rise to 7% (point 
C) . 
C) the quantity of loanable funds traded to decrease to $75 and the interest rate to fall to 5% (point 
B) . 
D) the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to 7% (point 
E) . 
A) the quantity of loanable funds traded to increase to $125 and the interest rate fall to 5% (point 
D) . 
B) the quantity of loanable funds traded to increase to $125 and the interest rate to rise to 7% (point 
C) . 
C) the quantity of loanable funds traded to decrease to $75 and the interest rate to fall to 5% (point 
B) . 
D) the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to 7% (point 
E) .

Question 9

Other things the same,if the government decreases transfer payments,then

Accepted Answer

A) both the interest rate and the equilibrium quantity of loanable funds fall. 
B) both the interest rate and the equilibrium quantity of loanable funds rise. 
C) the interest rate rises and the equilibrium quantity of loanable funds falls. 
D) the interest rate falls and the equilibrium quantity of loanable funds rises. 
A) both the interest rate and the equilibrium quantity of loanable funds fall. 
B) both the interest rate and the equilibrium quantity of loanable funds rise. 
C) the interest rate rises and the equilibrium quantity of loanable funds falls. 
D) the interest rate falls and the equilibrium quantity of loanable funds rises.

Question 10

Bond A and Bond B have identical characteristics except that Bond A has a higher interest rate.Which bond has a higher credit risk?

Accepted Answer

The answer of Bond A and Bond B have identical...

Question 11

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Accepted Answer

A) there is a surplus and the interest rate is above the equilibrium level. 
B) there is a surplus and the interest rate is below the equilibrium level. 
C) there is a shortage and the interest rate is above the equilibrium level. 
D) there is a shortage and the interest rate is below the equilibrium level. 
A) there is a surplus and the interest rate is above the equilibrium level. 
B) there is a surplus and the interest rate is below the equilibrium level. 
C) there is a shortage and the interest rate is above the equilibrium level. 
D) there is a shortage and the interest rate is below the equilibrium level.

Question 12

Figure 26-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars.  
-Refer to Figure 26-4.If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent,then the equilibrium real interest rate is

Accepted Answer

A) lower than 6 percent. 
B) 6 percent. 
C) between 6 percent and 8 percent. 
D) higher than 8 percent. 
A) lower than 6 percent. 
B) 6 percent. 
C) between 6 percent and 8 percent. 
D) higher than 8 percent.

Question 13

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Accepted Answer

A) there is a surplus so interest rates will rise. 
B) there is a surplus so interest rates will fall. 
C) there is a shortage so interest rates will rise. 
D) there is a shortage so interest rates will fall. 
A) there is a surplus so interest rates will rise. 
B) there is a surplus so interest rates will fall. 
C) there is a shortage so interest rates will rise. 
D) there is a shortage so interest rates will fall.

Question 14

Other things the same,an increase in the budget deficit

Accepted Answer

A) shifts the demand for loanable funds right,so the interest rate rises. 
B) shifts the demand for loanable funds left,so the interest rate falls. 
C) shifts the supply of loanable funds right,so the interest rate falls. 
D) shifts the supply of loanable funds left,so the interest rate rises. 
A) shifts the demand for loanable funds right,so the interest rate rises. 
B) shifts the demand for loanable funds left,so the interest rate falls. 
C) shifts the supply of loanable funds right,so the interest rate falls. 
D) shifts the supply of loanable funds left,so the interest rate rises.

Question 15

Which of the following events could explain a decrease in interest rates together with an increase in investment?

Accepted Answer

A) The government went from surplus to deficit. 
B) The government instituted an investment tax credit. 
C) The government reduced the tax rate on savings. 
D) None of the above is correct. 
A) The government went from surplus to deficit. 
B) The government instituted an investment tax credit. 
C) The government reduced the tax rate on savings. 
D) None of the above is correct.

Question 16

Other things the same,if the government increases transfer payments to households,then the effect of this on the government's budget

Accepted Answer

A) will make investment rise. 
B) will make the rate of interest rise. 
C) will make public saving rise. 
D) All of the above are correct. 
A) will make investment rise. 
B) will make the rate of interest rise. 
C) will make public saving rise. 
D) All of the above are correct.

Question 17

Figure 26-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars.  
-Refer to Figure 26-4.Which of the following events could explain a shift of the demand-for-loanable-funds curve from
 D1 to D2 ?

Accepted Answer

A) The tax code is reformed to encourage greater saving. 
B) The tax code is reformed to encourage greater investment. 
C) The government starts running a budget deficit. 
D) The government starts running a budget surplus. 
A) The tax code is reformed to encourage greater saving. 
B) The tax code is reformed to encourage greater investment. 
C) The government starts running a budget deficit. 
D) The government starts running a budget surplus.

Question 18

The source of the supply of loanable funds

Accepted Answer

A) is saving and the source of demand for loanable funds is investment. 
B) is investment and the source of demand for loanable funds is saving. 
C) and the demand for loanable funds is saving. 
D) and the demand for loanable funds is investment. 
A) is saving and the source of demand for loanable funds is investment. 
B) is investment and the source of demand for loanable funds is saving. 
C) and the demand for loanable funds is saving. 
D) and the demand for loanable funds is investment.

Question 19

Other things the same,the effects of an increase in transfer payments on the government's budget deficit will lead to

Accepted Answer

A) greater investment. 
B) a higher interest rate. 
C) higher public saving. 
D) All of the above are correct. 
A) greater investment. 
B) a higher interest rate. 
C) higher public saving. 
D) All of the above are correct.

Question 20

When the government goes from running a balanced budget to running a budget surplus,

Accepted Answer

A) national saving decreases,the interest rate rises,and the economy's long-run growth rate is likely to decrease. 
B) national saving increases,the interest rate falls,and the economy's long-run growth rate is likely to decrease. 
C) national saving decreases,the interest rate rises,and the economy's long-run growth rate is likely to increase. 
D) national saving increases,the interest rate falls,and the economy's long-run growth rate is likely to increase. 
A) national saving decreases,the interest rate rises,and the economy's long-run growth rate is likely to decrease. 
B) national saving increases,the interest rate falls,and the economy's long-run growth rate is likely to decrease. 
C) national saving decreases,the interest rate rises,and the economy's long-run growth rate is likely to increase. 
D) national saving increases,the interest rate falls,and the economy's long-run growth rate is likely to increase.

Exam 13: Saving Investment and the Financial System: The Market for Loanable Funds

When someone borrows to purchase capital goods, he is using someone else’s _____ to fund his _____.

A _____ does not engage in international trade in goods and services and it does not engage in international borrowing and lending.

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit.What would happen to the interest rate?

A decrease in government spending and the enactment of an investment tax credit would definitely cause

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Robert buys bonds.Rachel buys a new truck for her landscaping business.Identify both as savers,investors,both,or neither.

Figure 26-2.The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. r Q -Refer to Figure 26-2.What is measured along the horizontal axis of the graph?

Figure 26-5.Figure 26-5 shows the loanable funds market for a closed economy. -Refer to Figure 26-5.Starting at point A,a change in tax laws that encouraged households to save more would likely cause

Other things the same,if the government decreases transfer payments,then

Bond A and Bond B have identical characteristics except that Bond A has a higher interest rate.Which bond has a higher credit risk?

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Figure 26-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 26-4.If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent,then the equilibrium real interest rate is

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Other things the same,an increase in the budget deficit

Which of the following events could explain a decrease in interest rates together with an increase in investment?

Other things the same,if the government increases transfer payments to households,then the effect of this on the government's budget

Figure 26-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 26-4.Which of the following events could explain a shift of the demand-for-loanable-funds curve from D1 to D2 ?

The source of the supply of loanable funds

Other things the same,the effects of an increase in transfer payments on the government's budget deficit will lead to

When the government goes from running a balanced budget to running a budget surplus,

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

When someone borrows to purchase capital goods, he is using someone else’s _ to fund his _.

Figure 26-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 26-4.Which of the following events could explain a shift of the demand-for-loanable-funds curve from D₁ to D₂ ?