Question 1

When individuals become more willing to save,the:

Accepted Answer

A)  demand to borrow shifts outward. 
B)  demand to borrow shifts inward. 
C)  supply of savings shifts outward. 
D)  supply of savings shifts inward. 
A)  demand to borrow shifts outward. 
B)  demand to borrow shifts inward. 
C)  supply of savings shifts outward. 
D)  supply of savings shifts inward.

Question 2

Savings is defined as:

Accepted Answer

A)  income not spent on investment goods. 
B)  income not spent on consumption goods. 
C)  income not taxed by the government. 
D)  the purchase of new capital goods. 
A)  income not spent on investment goods. 
B)  income not spent on consumption goods. 
C)  income not taxed by the government. 
D)  the purchase of new capital goods.

Question 3

A person who is patient tends to save less.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions  
Figure: Loanable Funds Expansion
 
-(Figure: Loanable Funds Expansion)In the accompanying figure,if the demand for loanable funds increases from DLF to D1LF and the supply of loanable funds remains at SLF,the equilibrium interest rate will:

Accepted Answer

A)  increase to i1. 
B)  remain at i0. 
C)  fall below i0. 
D)  increase to i1 temporarily and then return to i0. 
A)  increase to i1. 
B)  remain at i0. 
C)  fall below i0. 
D)  increase to i1 temporarily and then return to i0.

Question 5

At which stage in life does someone generally dissave the most?

Accepted Answer

A)  shortly after taking the first job 
B)  during middle age 
C)  while raising a family 
D)  during retirement 
A)  shortly after taking the first job 
B)  during middle age 
C)  while raising a family 
D)  during retirement

Question 6

During a financial crisis in the early 2000s,the government of Argentina partially froze bank accounts for a year.Given the supply of saving and the demand to borrow functions,we would expect this action to cause the interest rate to:

Accepted Answer

A)  increase and borrowing to increase. 
B)  increase and borrowing to decrease. 
C)  decrease and borrowing to decrease. 
D)  decrease and borrowing to increase. 
A)  increase and borrowing to increase. 
B)  increase and borrowing to decrease. 
C)  decrease and borrowing to decrease. 
D)  decrease and borrowing to increase.

Question 7

The interest rate is simply another example of a market price.

Accepted Answer

A) True 
 B)False

Question 8

Investment is:

Accepted Answer

A)  the purchase of new capital goods. 
B)  income that is not spent on consumption goods. 
C)  the desire to have goods and services sooner rather than later (all else being equal). 
D)  a sophisticated IOU that documents who owes how much and when payment must be made. 
A)  the purchase of new capital goods. 
B)  income that is not spent on consumption goods. 
C)  the desire to have goods and services sooner rather than later (all else being equal). 
D)  a sophisticated IOU that documents who owes how much and when payment must be made.

Question 9

Explain how AIDS in Africa would affect consumption smoothing.

Accepted Answer

AIDS has unfortunately reduced the life

Question 10

The supply of loanable funds comes from _____,and the demand for loanable funds comes from _____.

Accepted Answer

A)  saving;investment 
B)  investment;saving 
C)  saving;consumption 
D)  investment;consumption 
A)  saving;investment 
B)  investment;saving 
C)  saving;consumption 
D)  investment;consumption

Question 11

Which of the following is NOT a reason for the financial crisis of 2007-2008?

Accepted Answer

A)  increases in the leverage ratios for financial intermediaries 
B)  collapse of the shadow banking system 
C)  excessive securitization of liabilities 
D)  excessive confidence about the stock market 
A)  increases in the leverage ratios for financial intermediaries 
B)  collapse of the shadow banking system 
C)  excessive securitization of liabilities 
D)  excessive confidence about the stock market

Question 12

Which of the following can be defined as saving according to economics?

Accepted Answer

A)  General Motors issues corporate bonds. 
B)  Microsoft sells stock at an initial public offering. 
C)  Sandra purchases a certificate of deposit from a bank. 
D)  Andrea finances her new car through an auto loan. 
A)  General Motors issues corporate bonds. 
B)  Microsoft sells stock at an initial public offering. 
C)  Sandra purchases a certificate of deposit from a bank. 
D)  Andrea finances her new car through an auto loan.

Question 13

A bond is a(n):

Accepted Answer

A)  liability for the issuer. 
B)  asset for the issuer. 
C)  promise by the buyer to pay. 
D)  asset for the issuer and a promise by the buyer to pay. 
A)  liability for the issuer. 
B)  asset for the issuer. 
C)  promise by the buyer to pay. 
D)  asset for the issuer and a promise by the buyer to pay.

Question 14

In financial markets,which group best represents the demand side of the market?

Accepted Answer

A)  stock markets 
B)  banks 
C)  borrowers 
D)  savers 
A)  stock markets 
B)  banks 
C)  borrowers 
D)  savers

Question 15

If the supply of loanable funds increases and the demand for loanable funds increases at the same time,interest rates will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  increase,decrease,or remain the same. 
A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  increase,decrease,or remain the same.

Question 16

The supply curve for savings indicates that the higher the interest rate,the:

Accepted Answer

A)  larger the quantity saved. 
B)  smaller the quantity saved. 
C)  larger the saver's income. 
D)  smaller the saver's income. 
A)  larger the quantity saved. 
B)  smaller the quantity saved. 
C)  larger the saver's income. 
D)  smaller the saver's income.

Question 17

Why is the demand to borrow positively related to the rate of economic growth?

Accepted Answer

A)  Lenders obtain additional wealth. 
B)  It provides motivation to keep spending to a minimum. 
C)  The incentive to invest is enhanced by economic growth. 
D)  It increases the opportunity cost of borrowing. 
A)  Lenders obtain additional wealth. 
B)  It provides motivation to keep spending to a minimum. 
C)  The incentive to invest is enhanced by economic growth. 
D)  It increases the opportunity cost of borrowing.

Question 18

A surplus of loanable funds will decrease supply in the loanable funds market,hence lowering interest rates.

Accepted Answer

A) True 
 B)False

Question 19

The desire to have goods and services soon rather than later is called:

Accepted Answer

A)  investment. 
B)  consumption smoothing. 
C)  savings. 
D)  time preference. 
A)  investment. 
B)  consumption smoothing. 
C)  savings. 
D)  time preference.

Question 20

According to the consumption-smoothing theory,people with a longer life expectancy:

Accepted Answer

A)  invest more in their lifetimes than those with shorter life expectancy. 
B)  have the same saving rates in their lifetimes as those with shorter life expectancy. 
C)  have higher savings rates in their lifetimes than those with shorter life expectancy. 
D)  have lower saving rates in their lifetimes than those with shorter life expectancy. 
A)  invest more in their lifetimes than those with shorter life expectancy. 
B)  have the same saving rates in their lifetimes as those with shorter life expectancy. 
C)  have higher savings rates in their lifetimes than those with shorter life expectancy. 
D)  have lower saving rates in their lifetimes than those with shorter life expectancy.

Exam 9: Saving,investment,and the Financial System

When individuals become more willing to save,the:

Savings is defined as:

A person who is patient tends to save less.

Use the following to answer questions Figure: Loanable Funds Expansion -(Figure: Loanable Funds Expansion)In the accompanying figure,if the demand for loanable funds increases from DLF to D1LF and the supply of loanable funds remains at SLF,the equilibrium interest rate will:

At which stage in life does someone generally dissave the most?

During a financial crisis in the early 2000s,the government of Argentina partially froze bank accounts for a year.Given the supply of saving and the demand to borrow functions,we would expect this action to cause the interest rate to:

The interest rate is simply another example of a market price.

Investment is:

Explain how AIDS in Africa would affect consumption smoothing.

The supply of loanable funds comes from _____,and the demand for loanable funds comes from _____.

Which of the following is NOT a reason for the financial crisis of 2007-2008?

Which of the following can be defined as saving according to economics?

A bond is a(n):

In financial markets,which group best represents the demand side of the market?

If the supply of loanable funds increases and the demand for loanable funds increases at the same time,interest rates will:

The supply curve for savings indicates that the higher the interest rate,the:

Why is the demand to borrow positively related to the rate of economic growth?

A surplus of loanable funds will decrease supply in the loanable funds market,hence lowering interest rates.

The desire to have goods and services soon rather than later is called:

According to the consumption-smoothing theory,people with a longer life expectancy:

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

Filters

Use the following to answer questions Figure: Loanable Funds Expansion -(Figure: Loanable Funds Expansion)In the accompanying figure,if the demand for loanable funds increases from D_LFto D¹_LF and the supply of loanable funds remains at S_LF,the equilibrium interest rate will:

The supply of loanable funds comes from _,and the demand for loanable funds comes from _.