Question 1

Suppose a country has a larger increase in debt in 2014 than it had in 2013.Then other things the same,

Accepted Answer

A) the supply of loanable funds shifts rightward and the interest rate falls. 
B) the supply of loanable funds shifts leftward and the interest rate rises. 
C) the demand for loanable funds shifts leftward and the interest rate falls. 
D) the demand for loanable funds shifts rightward and the interest rate rises. 
A) the supply of loanable funds shifts rightward and the interest rate falls. 
B) the supply of loanable funds shifts leftward and the interest rate rises. 
C) the demand for loanable funds shifts leftward and the interest rate falls. 
D) the demand for loanable funds shifts rightward and the interest rate rises.

Question 2

If a reform of the tax laws encourages greater saving,the result would be

Accepted Answer

A) higher interest rates and greater investment. 
B) higher interest rates and less investment. 
C) lower interest rates and greater investment. 
D) lower interest rate and less investment. 
A) higher interest rates and greater investment. 
B) higher interest rates and less investment. 
C) lower interest rates and greater investment. 
D) lower interest rate and less investment.

Question 3

If Congress instituted an investment tax credit

Accepted Answer

A) it would make buying bonds more desirable,so the demand for loanable funds would shift. 
B) it would make buying capital goods more desirable,so the demand for loanable funds would shift. 
C) it would make buying bonds more desirable,so the supply of loanable funds would shift. 
D) it would make buying capital goods more desirable,so the supply of loanable funds would shift. 
A) it would make buying bonds more desirable,so the demand for loanable funds would shift. 
B) it would make buying capital goods more desirable,so the demand for loanable funds would shift. 
C) it would make buying bonds more desirable,so the supply of loanable funds would shift. 
D) it would make buying capital goods more desirable,so the supply of loanable funds would shift.

Question 4

An increase in the quantity of loanable funds traded means that

Accepted Answer

A) firms are borrowing less and investment decreases. 
B) firms are borrowing less and investment increases. 
C) firms are borrowing more and investment increases. 
D) firms are borrowing more and investment decreases. 
A) firms are borrowing less and investment decreases. 
B) firms are borrowing less and investment increases. 
C) firms are borrowing more and investment increases. 
D) firms are borrowing more and investment decreases.

Question 5

The supply of loanable funds slopes

Accepted Answer

A) upward because an increase in the interest rate induces people to save more. 
B) downward because an increase in the interest rate induces people to save less. 
C) downward because an increase in the interest rate induces people to invest less. 
D) upward because an increase in the interest rate induces people to invest more. 
A) upward because an increase in the interest rate induces people to save more. 
B) downward because an increase in the interest rate induces people to save less. 
C) downward because an increase in the interest rate induces people to invest less. 
D) upward because an increase in the interest rate induces people to invest more.

Question 6

Which of the following statements is correct?

Accepted Answer

A) The interest rate that is usually reported is the interest rate that has been corrected for inflation. 
B) The supply of,and demand for,loanable funds depend on the real (rather than nominal)interest rate. 
C) If the nominal interest rate has decreased and the real interest rate has also decreased,then the inflation rate must have decreased as well. 
D) All of the above are correct. 
A) The interest rate that is usually reported is the interest rate that has been corrected for inflation. 
B) The supply of,and demand for,loanable funds depend on the real (rather than nominal)interest rate. 
C) If the nominal interest rate has decreased and the real interest rate has also decreased,then the inflation rate must have decreased as well. 
D) All of the above are correct.

Question 7

Which of the following statements is not correct?

Accepted Answer

A) If GDP is rising faster than debt,the government is,in some sense,living within its means. 
B) The ratio of debt to GDP in the United States has always been less than one. 
C) Debts during wars may distribute the burden of fighting the war more evenly across generations. 
D) During times of peace in the United States,the ratio of debt to GDP sometimes rose. 
A) If GDP is rising faster than debt,the government is,in some sense,living within its means. 
B) The ratio of debt to GDP in the United States has always been less than one. 
C) Debts during wars may distribute the burden of fighting the war more evenly across generations. 
D) During times of peace in the United States,the ratio of debt to GDP sometimes rose.

Question 8

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

Accepted Answer

A) The demand for loanable funds shifted rightward. 
B) The demand for loanable funds shifted leftward. 
C) The supply of loanable funds shifted rightward. 
D) The supply of loanable funds shifted leftward. 
A) The demand for loanable funds shifted rightward. 
B) The demand for loanable funds shifted leftward. 
C) The supply of loanable funds shifted rightward. 
D) The supply of loanable funds shifted leftward.

Question 9

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Accepted Answer

Investment spending

Question 10

The first three elements of a financial crisis are correctly represented as taking place in the following order:

Accepted Answer

A) large decline in some asset prices → insolvencies at financial institutions → decline in confidence in financial institutions 
B) insolvencies at financial institutions → decline in confidence in financial institutions → large decline in some asset prices 
C) insolvencies at financial institutions → economic downturn → credit crunch 
D) insolvencies at financial institutions → credit crunch → economic downturn 
A) large decline in some asset prices → insolvencies at financial institutions → decline in confidence in financial institutions 
B) insolvencies at financial institutions → decline in confidence in financial institutions → large decline in some asset prices 
C) insolvencies at financial institutions → economic downturn → credit crunch 
D) insolvencies at financial institutions → credit crunch → economic downturn

Question 11

Crowding out occurs when investment declines because

Accepted Answer

A) a budget deficit makes interest rates rise. 
B) a budget deficit makes interest rates fall. 
C) a budget surplus makes interest rates rise. 
D) a budget surplus makes interest rates fall. 
A) a budget deficit makes interest rates rise. 
B) a budget deficit makes interest rates fall. 
C) a budget surplus makes interest rates rise. 
D) a budget surplus makes interest rates fall.

Question 12

A restaurant chain announces declining revenues.What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

Accepted Answer

default ri

Question 13

Which of the following counts as part of the supply of loanable funds?

Accepted Answer

A) bank deposits and purchases of bonds 
B) bank deposits but not purchases of bonds 
C) purchases of bonds but not bank deposits 
D) neither purchases of bonds nor bank deposits 
A) bank deposits and purchases of bonds 
B) bank deposits but not purchases of bonds 
C) purchases of bonds but not bank deposits 
D) neither purchases of bonds nor bank deposits

Question 14

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.The position and/or slope of the Supply curve are influenced by

Accepted Answer

A) the level of public saving. 
B) the level of national saving. 
C) decisions made by people who have extra income they want to save and lend out. 
D) All of the above are correct. 
A) the level of public saving. 
B) the level of national saving. 
C) decisions made by people who have extra income they want to save and lend out. 
D) All of the above are correct.

Question 15

Other things the same,an increase in taxes with no change in government purchases makes national saving

Accepted Answer

A) rise.The supply of loanable funds shifts right. 
B) rise.The demand for loanable funds shifts right. 
C) fall.The supply of loanable funds shifts left. 
D) fall.The demand for loanable funds shifts left. 
A) rise.The supply of loanable funds shifts right. 
B) rise.The demand for loanable funds shifts right. 
C) fall.The supply of loanable funds shifts left. 
D) fall.The demand for loanable funds shifts left.

Question 16

If the government budget deficit increases,which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

Accepted Answer

The supply of loanab

Question 17

If the government instituted an investment tax credit,then which of the following would be higher in equilibrium?

Accepted Answer

A) saving and the interest rate 
B) saving but not the interest rate 
C) the interest rate but not saving 
D) neither saving nor the interest rate 
A) saving and the interest rate 
B) saving but not the interest rate 
C) the interest rate but not saving 
D) neither saving nor the interest rate

Question 18

In the loanable funds model,an increase in an investment tax credit would create a

Accepted Answer

A) shortage at the former equilibrium interest rate.This shortage would lead to a rise in the interest rate. 
B) shortage at the former equilibrium interest rate.This shortage would lead to a fall in the interest rate. 
C) surplus at the former equilibrium interest rate.This surplus would lead to a rise in the interest rate. 
D) surplus at the former equilibrium interest rate.This surplus would lead to a fall in the interest rate. 
A) shortage at the former equilibrium interest rate.This shortage would lead to a rise in the interest rate. 
B) shortage at the former equilibrium interest rate.This shortage would lead to a fall in the interest rate. 
C) surplus at the former equilibrium interest rate.This surplus would lead to a rise in the interest rate. 
D) surplus at the former equilibrium interest rate.This surplus would lead to a fall in the interest rate.

Question 19

For an imaginary economy,when the real interest rate is 7 percent,the quantity of loanable funds demanded is $500 and the quantity of loanable funds supplied is $500.Currently,the nominal interest rate is 9 percent and the inflation rate is 4 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.

Question 20

A larger budget surplus

Accepted Answer

A) raises the interest rate and investment. 
B) reduces the interest rate and investment. 
C) raises the interest rate and reduces investment. 
D) reduces the interest rate and raises investment. 
A) raises the interest rate and investment. 
B) reduces the interest rate and investment. 
C) raises the interest rate and reduces investment. 
D) reduces the interest rate and raises investment.

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

Suppose a country has a larger increase in debt in 2014 than it had in 2013.Then other things the same,

If a reform of the tax laws encourages greater saving,the result would be

If Congress instituted an investment tax credit

An increase in the quantity of loanable funds traded means that

The supply of loanable funds slopes

Which of the following statements is correct?

Which of the following statements is not correct?

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

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

The first three elements of a financial crisis are correctly represented as taking place in the following order:

Crowding out occurs when investment declines because

A restaurant chain announces declining revenues.What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

Which of the following counts as part of the supply of loanable funds?

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.The position and/or slope of the Supply curve are influenced by

Other things the same,an increase in taxes with no change in government purchases makes national saving

If the government budget deficit increases,which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

If the government instituted an investment tax credit,then which of the following would be higher in equilibrium?

In the loanable funds model,an increase in an investment tax credit would create a

For an imaginary economy,when the real interest rate is 7 percent,the quantity of loanable funds demanded is $500 and the quantity of loanable funds supplied is $500.Currently,the nominal interest rate is 9 percent and the inflation rate is 4 percent.Currently,

A larger 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