Question 1

At an 8% interest rate,the quantity of savings is $250 billion.What would the quantity of savings be if the interest rate falls to 5%?

Accepted Answer

A)  $190 billion 
B)  $250 billion 
C)  $300 billion 
D)  $500 billion 
A)  $190 billion 
B)  $250 billion 
C)  $300 billion 
D)  $500 billion

Question 2

Which of the following is NOT a role that banks play in the loanable funds market?

Accepted Answer

A)  minimize information costs 
B)  reduce opportunity costs 
C)  spread risk 
D)  provide middleman services 
A)  minimize information costs 
B)  reduce opportunity costs 
C)  spread risk 
D)  provide middleman services

Question 3

-A shortage of savings in the loanable funds market will:

Accepted Answer

A)  drive market interest rates down. 
B)  drive market interest rates up. 
C)  increase the supply of loanable funds. 
D)  increase the demand for loanable funds. 
A)  drive market interest rates down. 
B)  drive market interest rates up. 
C)  increase the supply of loanable funds. 
D)  increase the demand for loanable funds.

Question 4

The interest rate is the cost of borrowing.

Accepted Answer

A) True 
 B)False

Question 5

If $100 is saved at an annual interest rate of 10%,the return in one year will be:

Accepted Answer

A)  $11. 
B)  $110. 
C)  $10. 
D)  $111. 
A)  $11. 
B)  $110. 
C)  $10. 
D)  $111.

Question 6

In economics,investment refers to:

Accepted Answer

A)  saving. 
B)  dissaving. 
C)  the purchase of consumption goods. 
D)  the purchase of capital goods. 
A)  saving. 
B)  dissaving. 
C)  the purchase of consumption goods. 
D)  the purchase of capital goods.

Question 7

All else equal,time preference is the desire to:

Accepted Answer

A)  have goods and services sooner rather than later. 
B)  delay the purchase of goods and services. 
C)  have goods and services in retirement years. 
D)  have goods and services that are made in the current year. 
A)  have goods and services sooner rather than later. 
B)  delay the purchase of goods and services. 
C)  have goods and services in retirement years. 
D)  have goods and services that are made in the current year.

Question 8

The Lehman Brothers bankruptcy was the largest in history.

Accepted Answer

A) True 
 B)False

Question 9

The supply of savings function shows the relationship between saving and:

Accepted Answer

A)  consumption. 
B)  income. 
C)  age. 
D)  the interest rate. 
A)  consumption. 
B)  income. 
C)  age. 
D)  the interest rate.

Question 10

Why is saving so minimal in nations with a high population of AIDS victims?

Accepted Answer

A)  People with a short life expectancy tend to save less. 
B)  Governments provide an extensive social safety net. 
C)  Interest rates are not high enough. 
D)  Unemployment rates are too high. 
A)  People with a short life expectancy tend to save less. 
B)  Governments provide an extensive social safety net. 
C)  Interest rates are not high enough. 
D)  Unemployment rates are too high.

Question 11

If the interest rate rises from 5% to 9%,the number of new businesses will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  sharply increase,then level off. 
A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  sharply increase,then level off.

Question 12

If income and consumption are equal,saving must be:

Accepted Answer

A)  zero. 
B)  positive and rising. 
C)  positive and remaining relatively constant. 
D)  negative. 
A)  zero. 
B)  positive and rising. 
C)  positive and remaining relatively constant. 
D)  negative.

Question 13

The interest rate is a market price.

Accepted Answer

A) True 
 B)False

Question 14

When governments freeze bank accounts,they fail to:

Accepted Answer

A)  regulate the banking industry. 
B)  guarantee savings accounts. 
C)  promote consumption and spending. 
D)  provide secure property rights. 
A)  regulate the banking industry. 
B)  guarantee savings accounts. 
C)  promote consumption and spending. 
D)  provide secure property rights.

Question 15

An increase in the supply of saving curve will cause the equilibrium quantity of borrowing to:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  first increase and then decrease. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  first increase and then decrease.

Question 16

Studies have shown that the larger the fraction of government-owned banks in a country,the faster the country's rate of per capita GDP growth.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following explains why the supply of savings is upward sloping?

Accepted Answer

A)  An increase in the interest rate leads to an increase in the quantity of saving. 
B)  An increase in the interest rate leads to an increase in the opportunity cost of saving. 
C)  An increase in investment leads to an increase in the level of saving. 
D)  An increase in time preference leads to an increase in the quantity of saving. 
A)  An increase in the interest rate leads to an increase in the quantity of saving. 
B)  An increase in the interest rate leads to an increase in the opportunity cost of saving. 
C)  An increase in investment leads to an increase in the level of saving. 
D)  An increase in time preference leads to an increase in the quantity of saving.

Question 18

When bond prices increase,interest rates:

Accepted Answer

A)  must increase. 
B)  must decrease. 
C)  will not change. 
D)  will first increase and then decrease. 
A)  must increase. 
B)  must decrease. 
C)  will not change. 
D)  will first increase and then decrease.

Question 19

Something of value that by agreement becomes the property of the lender if the borrower defaults is called:

Accepted Answer

A)  a stock. 
B)  a bond. 
C)  collateral. 
D)  a liability. 
A)  a stock. 
B)  a bond. 
C)  collateral. 
D)  a liability.

Question 20

The demand to borrow function is:

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical. 
A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical.

Exam 9: Saving,investment,and the Financial System

At an 8% interest rate,the quantity of savings is $250 billion.What would the quantity of savings be if the interest rate falls to 5%?

Which of the following is NOT a role that banks play in the loanable funds market?

-A shortage of savings in the loanable funds market will:

The interest rate is the cost of borrowing.

If $100 is saved at an annual interest rate of 10%,the return in one year will be:

In economics,investment refers to:

All else equal,time preference is the desire to:

The Lehman Brothers bankruptcy was the largest in history.

The supply of savings function shows the relationship between saving and:

Why is saving so minimal in nations with a high population of AIDS victims?

If the interest rate rises from 5% to 9%,the number of new businesses will:

If income and consumption are equal,saving must be:

The interest rate is a market price.

When governments freeze bank accounts,they fail to:

An increase in the supply of saving curve will cause the equilibrium quantity of borrowing to:

Studies have shown that the larger the fraction of government-owned banks in a country,the faster the country's rate of per capita GDP growth.

Which of the following explains why the supply of savings is upward sloping?

When bond prices increase,interest rates:

Something of value that by agreement becomes the property of the lender if the borrower defaults is called:

The demand to borrow function is:

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

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