Question 1

The nominal interest rate increases by 5 percent.What is the effect on investment?

Accepted Answer

A) The real interest rate increases and investment increases 
B) ​The real interest rate decreases and investment decreases. 
C) ​The real interest rate increases and investment decreases. 
D) ​Cannot be determined from the given information 
A) The real interest rate increases and investment increases 
B) ​The real interest rate decreases and investment decreases. 
C) ​The real interest rate increases and investment decreases. 
D) ​Cannot be determined from the given information

Question 2

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

Accepted Answer

A) The supply of loanable funds would shift rightward and investment would increase. 
B) The supply of loanable funds would shift leftward and investment would decrease. 
C) The demand for loanable funds would shift rightward and investment would increase. 
D) The demand for loanable funds would shift leftward and investment would decrease. 
A) The supply of loanable funds would shift rightward and investment would increase. 
B) The supply of loanable funds would shift leftward and investment would decrease. 
C) The demand for loanable funds would shift rightward and investment would increase. 
D) The demand for loanable funds would shift leftward and investment would decrease.

Question 3

Suppose there is a shortage in the market for loanable funds.Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Accepted Answer

The interest rate is

Question 4

In the terminology of macroeconomics,what's the difference between a saver and an investor?

Accepted Answer

A saver earns more than he spe

Question 5

A budget deficit

Accepted Answer

A) changes the supply of loanable funds. 
B) changes the demand for loanable funds. 
C) changes both the supply of and demand for loanable funds. 
D) does not influence the supply of or the demand for loanable funds. 
A) changes the supply of loanable funds. 
B) changes the demand for loanable funds. 
C) changes both the supply of and demand for loanable funds. 
D) does not influence the supply of or the demand for loanable funds.

Question 6

If the nominal interest rate is 3 percent and the inflation rate is 4 percent,then the real interest rate is

Accepted Answer

A) 7 percent. 
B) -1 percent. 
C) 3 percent. 
D) 4 percent. 
A) 7 percent. 
B) -1 percent. 
C) 3 percent. 
D) 4 percent.

Question 7

In a closed economy taxes are $750 billion,government transfers are $400 billion,government expenditures are $500 billion,and investment is $400 billion.What are private saving,public saving and national saving?

Accepted Answer

Private saving is $550 billion

Question 8

If the supply of loanable funds shifts to the right,then the equilibrium interest rate

Accepted Answer

A) and quantity of loanable funds rises. 
B) and quantity of loanable funds falls. 
C) rises and the quantity of loanable funds falls. 
D) falls and the quantity of loanable funds rises. 
A) and quantity of loanable funds rises. 
B) and quantity of loanable funds falls. 
C) rises and the quantity of loanable funds falls. 
D) falls and the quantity of loanable funds rises.

Question 9

In 2002 mortgage rates fell and mortgage lending increased.Which of the following could explain both of these changes?

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 10

Figure 26-1.The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves.  
-Refer to Figure 26-1.Which of the following events would shift the supply curve from S1 to S2?

Accepted Answer

A) In response to tax reform,firms are encouraged to invest more than they previously invested. 
B) In response to tax reform,households are encouraged to save more than they previously saved. 
C) Government goes from running a balanced budget to running a budget deficit. 
D) Any of the above events would shift the supply curve from S1 to S2. 
A) In response to tax reform,firms are encouraged to invest more than they previously invested. 
B) In response to tax reform,households are encouraged to save more than they previously saved. 
C) Government goes from running a balanced budget to running a budget deficit. 
D) Any of the above events would shift the supply curve from S1 to S2.

Question 11

Public saving is the difference between _____ and _____.

Accepted Answer

tax revenue, governm

Question 12

From 2009 to 2012,the federal government's budget deficit was about

Accepted Answer

A) 5 percent of GDP,and this led to the highest debt-GDP ratio in U.S history. 
B) 10 percent of GDP,and this led to the highest debt-GDP ratio in U.S history. 
C) 5 percent of GDP,and this led to the highest debt-GDP ratio since World War II. 
D) 9 percent of GDP,and this led to the highest debt-GDP ratio since World War II. 
A) 5 percent of GDP,and this led to the highest debt-GDP ratio in U.S history. 
B) 10 percent of GDP,and this led to the highest debt-GDP ratio in U.S history. 
C) 5 percent of GDP,and this led to the highest debt-GDP ratio since World War II. 
D) 9 percent of GDP,and this led to the highest debt-GDP ratio since World War II.

Question 13

If at some interest rate desired investment is $400 billion,desired private saving is $600 billion,and the budget deficit is $300 billion,is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

Accepted Answer

There is a

Question 14

If the budget deficit increases then

Accepted Answer

A) saving and the interest rate rise. 
B) saving rises and the interest rate falls. 
C) saving falls and the interest rate rises. 
D) saving and the interest rate fall. 
A) saving and the interest rate rise. 
B) saving rises and the interest rate falls. 
C) saving falls and the interest rate rises. 
D) saving and the interest rate fall.

Question 15

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.  
-Refer to Figure 26-3.Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Accepted Answer

A) a movement from Point A to Point C 
B) a movement from Point B to Point A 
C) a movement from Point B to Point F 
D) a movement from Point C to Point B 
A) a movement from Point A to Point C 
B) a movement from Point B to Point A 
C) a movement from Point B to Point F 
D) a movement from Point C to Point B

Question 16

Bond A and Bond B are identical except Bond B has a longer term. Therefore, we expect Bond _____ to pay a higher rate of interest.

Accepted Answer

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

Question 17

If the inflation rate is 2 percent and the real interest rate is 7 percent,then the nominal interest rate is

Accepted Answer

A) 3.5 percent. 
B) 5 percent. 
C) 9 percent 
D) 7 percent. 
A) 3.5 percent. 
B) 5 percent. 
C) 9 percent 
D) 7 percent.

Question 18

The slope of the supply of loanable funds curve represents the

Accepted Answer

A) positive relation between the real interest rate and investment. 
B) positive relation between the real interest rate and saving. 
C) negative relation between the real interest rate and investment. 
D) negative relation between the real interest rate and saving. 
A) positive relation between the real interest rate and investment. 
B) positive relation between the real interest rate and saving. 
C) negative relation between the real interest rate and investment. 
D) negative relation between the real interest rate and saving.

Question 19

A change in the tax laws that increases the supply of loanable funds will have a smaller effect on investment when

Accepted Answer

A) the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic. 
B) the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic. 
C) both the demand for and supply of loanable funds are more elastic. 
D) both the demand for and supply of loanable funds are more inelastic. 
A) the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic. 
B) the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic. 
C) both the demand for and supply of loanable funds are more elastic. 
D) both the demand for and supply of loanable funds are more inelastic.

Question 20

Bolivia had a smaller budget deficit in 2003 than in 2002.Other things the same,we would expect this reduction in the budget deficit to have

Accepted Answer

A) increased both interest rates and investment. 
B) increased interest rates and decreased investment. 
C) decreased interest rates and increased investment. 
D) decreased both interest rates and investment. 
A) increased both interest rates and investment. 
B) increased interest rates and decreased investment. 
C) decreased interest rates and increased investment. 
D) decreased both interest rates and investment.

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

The nominal interest rate increases by 5 percent.What is the effect on investment?

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

Suppose there is a shortage in the market for loanable funds.Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

In the terminology of macroeconomics,what's the difference between a saver and an investor?

A budget deficit

If the nominal interest rate is 3 percent and the inflation rate is 4 percent,then the real interest rate is

In a closed economy taxes are $750 billion,government transfers are $400 billion,government expenditures are $500 billion,and investment is $400 billion.What are private saving,public saving and national saving?

If the supply of loanable funds shifts to the right,then the equilibrium interest rate

In 2002 mortgage rates fell and mortgage lending increased.Which of the following could explain both of these changes?

Figure 26-1.The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. -Refer to Figure 26-1.Which of the following events would shift the supply curve from S1 to S2?

Public saving is the difference between _____ and _____.

From 2009 to 2012,the federal government's budget deficit was about

If at some interest rate desired investment is $400 billion,desired private saving is $600 billion,and the budget deficit is $300 billion,is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

If the budget deficit increases then

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3.Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Bond A and Bond B are identical except Bond B has a longer term. Therefore, we expect Bond _____ to pay a higher rate of interest.

If the inflation rate is 2 percent and the real interest rate is 7 percent,then the nominal interest rate is

The slope of the supply of loanable funds curve represents the

A change in the tax laws that increases the supply of loanable funds will have a smaller effect on investment when

Bolivia had a smaller budget deficit in 2003 than in 2002.Other things the same,we would expect this reduction in the budget deficit to have

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

Public saving is the difference between _ and _.