Question 1

What is a mutual fund?

Accepted Answer

An institution that sells shar

Question 2

We interpret the meaning of "loanable funds" as the

Accepted Answer

A) flow of resources available from private saving. 
B) flow of resources available to fund private investment. 
C) resources borrowed by private investors and by government. 
D) resources lent by private investors and by government. 
A) flow of resources available from private saving. 
B) flow of resources available to fund private investment. 
C) resources borrowed by private investors and by government. 
D) resources lent by private investors and by government.

Question 3

Suppose the government ran a budget surplus in 2010 and a larger surplus in 2011.The loanable funds model would predict that,as a result of the increase in the surplus,

Accepted Answer

A) both the government debt and interest rates increased between 2010 and 2011. 
B) both the government debt and interest rates decreased between 2010 and 2011. 
C) the government debt increased and interest rates decreased between 2010 and 2011. 
D) the government debt decreased and interest rates increased between 2010 and 2011. 
A) both the government debt and interest rates increased between 2010 and 2011. 
B) both the government debt and interest rates decreased between 2010 and 2011. 
C) the government debt increased and interest rates decreased between 2010 and 2011. 
D) the government debt decreased and interest rates increased between 2010 and 2011.

Question 4

When tax code changes reduce saving incentives, the interest rate will _____ and investment will _____.

Accepted Answer

The answer of When tax code changes reduce saving incentives,...

Question 5

Suppose the U.S.offered a tax credit for firms that built new factories in the U.S.Then

Accepted Answer

A) the demand for loanable funds would shift rightward,initially creating a surplus of loanable funds at the original interest rate. 
B) the demand for loanable funds would shift rightward,initially creating a shortage of loanable funds at the original interest rate. 
C) the supply of loanable funds would shift rightward,initially creating a surplus of loanable funds at the original interest rate. 
D) the supply of loanable funds would shift rightward,initially creating a shortage of loanable funds at the original interest rate. 
A) the demand for loanable funds would shift rightward,initially creating a surplus of loanable funds at the original interest rate. 
B) the demand for loanable funds would shift rightward,initially creating a shortage of loanable funds at the original interest rate. 
C) the supply of loanable funds would shift rightward,initially creating a surplus of loanable funds at the original interest rate. 
D) the supply of loanable funds would shift rightward,initially creating a shortage of loanable funds at the original interest rate.

Question 6

_____ and _____ are the two most important financial intermediaries.

Accepted Answer

Banks, Mut

Question 7

According to the loanable funds model,which of the following events would result in higher interest rates and greater saving?

Accepted Answer

A) Firms become pessimistic about the future and,as a result,they cut back on their plans to buy new equipment and build new factories. 
B) The government goes from running a budget deficit to running a budget surplus. 
C) Congress passes a reform of the tax laws that encourages greater saving. 
D) Congress passes a reform of the tax laws that encourages greater investment. 
A) Firms become pessimistic about the future and,as a result,they cut back on their plans to buy new equipment and build new factories. 
B) The government goes from running a budget deficit to running a budget surplus. 
C) Congress passes a reform of the tax laws that encourages greater saving. 
D) Congress passes a reform of the tax laws that encourages greater investment.

Question 8

Which of the following statements is correct?

Accepted Answer

A) As a group,economists see no purpose in distinguishing between the nominal interest rate and the real interest rate. 
B) The interest rate that is usually reported is the nominal interest rate. 
C) If the nominal interest rate increases and the inflation rate remains unchanged,then the real interest rate decreases. 
D) All of the above are correct. 
A) As a group,economists see no purpose in distinguishing between the nominal interest rate and the real interest rate. 
B) The interest rate that is usually reported is the nominal interest rate. 
C) If the nominal interest rate increases and the inflation rate remains unchanged,then the real interest rate decreases. 
D) All of the above are correct.

Question 9

Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds?

Accepted Answer

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

Question 10

If there is shortage of loanable funds,then

Accepted Answer

A) the supply for loanable funds shifts right and the demand shifts left. 
B) the supply for loanable funds shifts left and the demand shifts right. 
C) neither curve shifts,but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D) neither curve shifts,but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium. 
A) the supply for loanable funds shifts right and the demand shifts left. 
B) the supply for loanable funds shifts left and the demand shifts right. 
C) neither curve shifts,but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D) neither curve shifts,but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

Question 11

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 5 percent,then the equilibrium nominal interest rate is

Accepted Answer

A) 11 percent. 
B) approximately 6 percent. 
C) between 6 percent and 8 percent. 
D) between 11 percent and 13 percent. 
A) 11 percent. 
B) approximately 6 percent. 
C) between 6 percent and 8 percent. 
D) between 11 percent and 13 percent.

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.Regard the position of the Supply curve as fixed,as on the graph.If the real interest rate is 4 percent,the inflation rate is 2 percent,and the market for loanable funds is in equilibrium,then the position of the demand-for-loanable-funds curve must be

Accepted Answer

A)  D1 . 
B)  D2 . 
C) between D1 and D2 . 
D) to the left of D1. 
A)  D1 . 
B)  D2 . 
C) between D1 and D2 . 
D) to the left of D1.

Question 13

Suppose the market for loanable funds is in equilibrium.What would happen in the market for loanable funds,other things the same,if the Congress and President increased the maximum contribution limits to 401(k)and 403(b)tax-deferred retirement accounts?

Accepted Answer

A) the interest rate and quantity of loanable funds would increase 
B) the interest rate and quantity of loanable funds would decrease. 
C) the interest rate would increase and the quantity of loanable funds would decrease. 
D) the interest rate would decrease and the quantity of loanable funds would increase. 
A) the interest rate and quantity of loanable funds would increase 
B) the interest rate and quantity of loanable funds would decrease. 
C) the interest rate would increase and the quantity of loanable funds would decrease. 
D) the interest rate would decrease and the quantity of loanable funds would increase.

Question 14

The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings.It was planning to use the money to build a new factory.Recently,the rate of interest has increased.The increase in the rate of interest should

Accepted Answer

A) not influence the decision to build the factory because The Eye of Horus doesn't have to borrow any money. 
B) not influence the decision to build the factory because its stockholders are expecting a new factory. 
C) make it more likely that The Eye of Horus will build the factory because a higher interest rate will make the factory more valuable. 
D) make it less likely that The Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher. 
A) not influence the decision to build the factory because The Eye of Horus doesn't have to borrow any money. 
B) not influence the decision to build the factory because its stockholders are expecting a new factory. 
C) make it more likely that The Eye of Horus will build the factory because a higher interest rate will make the factory more valuable. 
D) make it less likely that The Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher.

Question 15

In 2009,the U.S.government's budget deficit increased substantially.Other things the same,this means the

Accepted Answer

A) supply of loanable funds shifted to the right. 
B) supply of loanable funds shifted to the left. 
C) demand for loanable funds shifted to the right. 
D) demand for loanable funds shifted to the left. 
A) supply of loanable funds shifted to the right. 
B) supply of loanable funds shifted to the left. 
C) demand for loanable funds shifted to the right. 
D) demand for loanable funds shifted to the left.

Question 16

The ratio of debt to GDP in the United States

Accepted Answer

A) tends to rise during wars. 
B) rose during the decade that began in 2001. 
C) fell during the late 1990s. 
D) All of the above are correct. 
A) tends to rise during wars. 
B) rose during the decade that began in 2001. 
C) fell during the late 1990s. 
D) All of the above are correct.

Question 17

Kroger's grocery chain wants to finance the purchase of a new warehouse.It decides to sell bonds.

Accepted Answer

A) Kroger's plans to use equity financing and its action is part of the demand for loanable funds. 
B) Kroger's plans to use equity financing and its action is part of the supply of loanable funds. 
C) Kroger's plans to use debt financing and its action is part of the demand for loanable funds. 
D) Kroger's plans to use debt financing and its action is part of the supply of loanable funds. 
A) Kroger's plans to use equity financing and its action is part of the demand for loanable funds. 
B) Kroger's plans to use equity financing and its action is part of the supply of loanable funds. 
C) Kroger's plans to use debt financing and its action is part of the demand for loanable funds. 
D) Kroger's plans to use debt financing and its action is part of the supply of loanable funds.

Question 18

Woody wants to open a pet store and needs to buy a building.Both the nominal interest rate and the inflation rate increase by 2 percent.Now,Woody

Accepted Answer

A) will not buy the building. 
B) ​is more likely to buy the building. 
C) ​is less likely to buy the building. 
D) ​is just as likely to buy the building as before. 
A) will not buy the building. 
B) ​is more likely to buy the building. 
C) ​is less likely to buy the building. 
D) ​is just as likely to buy the building as before.

Question 19

A government budget deficit affects the supply of loanable funds,rather than the demand for loanable funds,because

Accepted Answer

A) in our model of the loanable funds market,we define "loanable funds" as the flow of resources available to fund private investment. 
B) in our model of the loanable funds market,we define "loanable funds" as the flow of resources available from private saving. 
C) markets for government debt are fundamentally different from markets for private debt. 
D) of our assumption that the economy is closed. 
A) in our model of the loanable funds market,we define "loanable funds" as the flow of resources available to fund private investment. 
B) in our model of the loanable funds market,we define "loanable funds" as the flow of resources available from private saving. 
C) markets for government debt are fundamentally different from markets for private debt. 
D) of our assumption that the economy is closed.

Question 20

For an imaginary economy,when the real interest rate is 5 percent,the quantity of loanable funds demanded is $100,000 and the quantity of loanable funds supplied is $100,000.Currently,the nominal interest rate is 6 percent and the inflation rate is 2 percent.Currently,

Accepted Answer

A) the market for loanable funds is in equilibrium. 
B) the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will rise. 
C) the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will fall. 
D) the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,and as a result the real interest rate will rise. 
A) the market for loanable funds is in equilibrium. 
B) the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will rise. 
C) the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will fall. 
D) the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,and as a result the real interest rate will rise.

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

What is a mutual fund?

We interpret the meaning of "loanable funds" as the

Suppose the government ran a budget surplus in 2010 and a larger surplus in 2011.The loanable funds model would predict that,as a result of the increase in the surplus,

When tax code changes reduce saving incentives, the interest rate will _____ and investment will _____.

Suppose the U.S.offered a tax credit for firms that built new factories in the U.S.Then

_____ and _____ are the two most important financial intermediaries.

According to the loanable funds model,which of the following events would result in higher interest rates and greater saving?

Which of the following statements is correct?

Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds?

If there is shortage of loanable funds,then

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 5 percent,then the equilibrium nominal interest rate is

Suppose the market for loanable funds is in equilibrium.What would happen in the market for loanable funds,other things the same,if the Congress and President increased the maximum contribution limits to 401(k)and 403(b)tax-deferred retirement accounts?

The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings.It was planning to use the money to build a new factory.Recently,the rate of interest has increased.The increase in the rate of interest should

In 2009,the U.S.government's budget deficit increased substantially.Other things the same,this means the

The ratio of debt to GDP in the United States

Kroger's grocery chain wants to finance the purchase of a new warehouse.It decides to sell bonds.

Woody wants to open a pet store and needs to buy a building.Both the nominal interest rate and the inflation rate increase by 2 percent.Now,Woody

A government budget deficit affects the supply of loanable funds,rather than the demand for loanable funds,because

For an imaginary economy,when the real interest rate is 5 percent,the quantity of loanable funds demanded is $100,000 and the quantity of loanable funds supplied is $100,000.Currently,the nominal interest rate is 6 percent and the inflation rate is 2 percent.Currently,

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

Application International Trade: Part A

When tax code changes reduce saving incentives, the interest rate will _ and investment will _.

_ and _ are the two most important financial intermediaries.