Question 1

Which of the following would shift the demand for loanable funds to the right?

Accepted Answer

A) income tax increases 
B) government expenditures increase 
C) the interest rate falls 
D) Congress and the president pass an investment tax credit 
A) income tax increases 
B) government expenditures increase 
C) the interest rate falls 
D) Congress and the president pass an investment tax credit

Question 2

Kathleen is considering expanding her dress shop.If interest rates rise she is

Accepted Answer

A) less likely to expand.This illustrates why the supply of loanable funds slopes downward. 
B) more likely to expand.This illustrates why the supply of loanable funds slopes upward. 
C) less likely to expand.This illustrates why the demand for loanable funds slopes downward. 
D) more likely to expand.This illustrates why the demand for loanable funds slopes upward. 
A) less likely to expand.This illustrates why the supply of loanable funds slopes downward. 
B) more likely to expand.This illustrates why the supply of loanable funds slopes upward. 
C) less likely to expand.This illustrates why the demand for loanable funds slopes downward. 
D) more likely to expand.This illustrates why the demand for loanable funds slopes upward.

Question 3

A larger budget deficit

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.

Question 4

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 reduction in government spending would cause

Accepted Answer

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

Question 5

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 shows the effects of households' decision to save more?

Accepted Answer

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

Question 6

Crowding out occurs when

Accepted Answer

A) investment declines because a budget deficit makes interest rates rise. 
B) investment declines because a budget deficit makes interest rates fall. 
C) investment increases because a budget surplus makes interest rates rise. 
D) investment increases because a budget surplus makes interest rates fall. 
A) investment declines because a budget deficit makes interest rates rise. 
B) investment declines because a budget deficit makes interest rates fall. 
C) investment increases because a budget surplus makes interest rates rise. 
D) investment increases because a budget surplus makes interest rates fall.

Question 7

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

Accepted Answer

A) The government runs a larger deficit. 
B) The government institutes an investment tax credit. 
C) The government replaces the income tax with a consumption tax. 
D) None of the above is correct. 
A) The government runs a larger deficit. 
B) The government institutes an investment tax credit. 
C) The government replaces the income tax with a consumption tax. 
D) None of the above is correct.

Question 8

If the nominal interest rate is 7 percent and the rate of inflation is 3 percent,then the real interest rate is

Accepted Answer

A) 7 percent. 
B) 4 percent. 
C) 3 percent. 
D) 10 percent. 
A) 7 percent. 
B) 4 percent. 
C) 3 percent. 
D) 10 percent.

Question 9

Suppose government expenditures on goods and services and net taxes both decrease,and expenditures fall by more than net taxes.The effects of these changes on the budget deficit cause

Accepted Answer

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

Question 10

Suppose a country repealed its investment tax credit.The effects of this are represented by shifting the

Accepted Answer

A) demand for and the supply of loanable funds to the right. 
B) demand for and the supply of loanable funds to the left. 
C) supply of loanable funds to the right and the demand for loanable funds to the left. 
D) None of the above is correct. 
A) demand for and the supply of loanable funds to the right. 
B) demand for and the supply of loanable funds to the left. 
C) supply of loanable funds to the right and the demand for loanable funds to the left. 
D) None of the above is correct.

Question 11

If the government currently has a budget deficit,then

Accepted Answer

A) it does not necessarily have a debt. 
B) its debt is increasing. 
C) government expenditures are greater than taxes. 
D) All of the above are correct. 
A) it does not necessarily have a debt. 
B) its debt is increasing. 
C) government expenditures are greater than taxes. 
D) All of the above are correct.

Question 12

Suppose that Congress were to repeal an investment tax credit.What would happen in the market for loanable funds?

Accepted Answer

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

Question 13

Which of the following would necessarily increase the equilibrium interest rate?

Accepted Answer

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

Question 14

When the government runs a budget deficit,

Accepted Answer

A) interest rates are lower than they would be if the budget were balanced. 
B) national saving is higher than it would be if the budget were balanced. 
C) investment is lower than it would be if the budget were balanced. 
D) All of the above are correct. 
A) interest rates are lower than they would be if the budget were balanced. 
B) national saving is higher than it would be if the budget were balanced. 
C) investment is lower than it would be if the budget were balanced. 
D) All of the above are correct.

Question 15

The income that households have left after paying their taxes and paying for their consumption is known as_______.

Accepted Answer

The answer of The income that households have left after...

Question 16

If the demand for loanable funds shifts to the left,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 17

Other things the same,a higher interest rate induces people to

Accepted Answer

A) save more,so the supply of loanable funds slopes upward. 
B) save less,so the supply of loanable funds slopes downward. 
C) invest more,so the supply of loanable funds slopes upward. 
D) invest less,so the supply of loanable funds slopes downward. 
A) save more,so the supply of loanable funds slopes upward. 
B) save less,so the supply of loanable funds slopes downward. 
C) invest more,so the supply of loanable funds slopes upward. 
D) invest less,so the supply of loanable funds slopes downward.

Question 18

The real interest rate is the

Accepted Answer

A) interest rate corrected for inflation. 
B) interest rate as usually reported by banks. 
C) difference between the interest rate charged by banks on the loans they make and the interest rate paid by banks to their depositors. 
D) difference between the average dividend yield on stocks and the average interest rate on bonds. 
A) interest rate corrected for inflation. 
B) interest rate as usually reported by banks. 
C) difference between the interest rate charged by banks on the loans they make and the interest rate paid by banks to their depositors. 
D) difference between the average dividend yield on stocks and the average interest rate on bonds.

Question 19

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.  
-Refer to Figure 26-3.A shift of the demand curve from D1 to D2 is called

Accepted Answer

A) an increase in the demand for loanable funds,and that increase would originate from people who had some extra income they wanted to lend. 
B) an increase in the demand for loanable funds,and that increase would originate from households and firms who wish to borrow to make investments. 
C) a decrease in the demand for loanable funds,and that decrease would originate from people who had some extra income they wanted to lend. 
D) a decrease in the demand for loanable funds,and that decrease would originate from households and firms who wish to borrow to make investments. 
A) an increase in the demand for loanable funds,and that increase would originate from people who had some extra income they wanted to lend. 
B) an increase in the demand for loanable funds,and that increase would originate from households and firms who wish to borrow to make investments. 
C) a decrease in the demand for loanable funds,and that decrease would originate from people who had some extra income they wanted to lend. 
D) a decrease in the demand for loanable funds,and that decrease would originate from households and firms who wish to borrow to make investments.

Question 20

Which of the following could explain an increase in the interest rate and 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.

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

Which of the following would shift the demand for loanable funds to the right?

Kathleen is considering expanding her dress shop.If interest rates rise she is

A larger budget deficit

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 reduction in government spending would cause

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 shows the effects of households' decision to save more?

Crowding out occurs when

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

If the nominal interest rate is 7 percent and the rate of inflation is 3 percent,then the real interest rate is

Suppose government expenditures on goods and services and net taxes both decrease,and expenditures fall by more than net taxes.The effects of these changes on the budget deficit cause

Suppose a country repealed its investment tax credit.The effects of this are represented by shifting the

If the government currently has a budget deficit,then

Suppose that Congress were to repeal an investment tax credit.What would happen in the market for loanable funds?

Which of the following would necessarily increase the equilibrium interest rate?

When the government runs a budget deficit,

The income that households have left after paying their taxes and paying for their consumption is known as_______.

If the demand for loanable funds shifts to the left,then the equilibrium interest rate

Other things the same,a higher interest rate induces people to

The real interest rate is the

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3.A shift of the demand curve from D1 to D2 is called

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

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

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3.A shift of the demand curve from D₁ to D₂ is called