Question 1

The amount paid to postpone the use of wealth divided by the amount of wealth whose use is postponed is a(n):

Accepted Answer

A)  interest rate. 
B)  price-earnings ratio. 
C)  insurance premium. 
D)  discount factor.

Question 2

The supply curve of land in a particular location is:

Accepted Answer

A)  a horizontal line. 
B)  a vertical line 
C)  upward sloping but not vertical. 
D)  upward sloping and then backward sloping.

Question 3

The owner of an exhaustible resource should ________ current extraction rate if the expected price increase of the resource is ________ the interest rate.

Accepted Answer

A)  increase; equal to 
B)  increase; greater than 
C)  decrease; less than 
D)  decrease; greater than

Question 4

Use the following to answer question(s): The Demand Curve for Capital
 
-(Exhibit: The Demand Curve for Capital) The demand curve for capital would shift to the right if:

Accepted Answer

A)  the labor force increased. 
B)  the price of labor rises. 
C)  the marginal product of capital falls. 
D)  All of the above are true.

Question 5

Use the following to answer question(s): Loanable Funds and Capital Markets
 
-(Exhibit: Loanable Funds and Capital Markets) If consumers decide to increase current consumption, this is reflected in Panel:

Accepted Answer

A)  (a). 
B)  (b). 
C)  (c). 
D)  (d).

Question 6

Use the following to answer question(s): Loanable Funds and Capital Markets
 
-(Exhibit: Loanable Funds and Capital Markets) A decrease in saving and a:

Accepted Answer

A)  subsequent rise in the supply of loanable funds is shown in Panel (c). 
B)  fall in the supply of loanable funds is shown in Panel (c). 
C)  subsequent increase in the demand for capital is shown in Panel(b). 
D)  rise in the interest rate is shown in Panel (d) as a movement along the demand for financial capital curve from a lower interest rate to a higher interest rate.

Question 7

If consumption exceeds income, dissaving takes place.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is (are) true?

Accepted Answer

A)  The returns to capital are spread over the period in which capital is used. 
B)  The returns to capital are certain. 
C)  The choice to acquire capital is a choice to forego future consumption. 
D)  All of the above are true.

Question 9

The present value of a future payment decreases if the:

Accepted Answer

A)  period between the present and the future increases. 
B)  future payment increases. 
C)  interest rate decreases. 
D)  stock market rises.

Question 10

Use the following to answer question(s): The Demand Curve for Capital
 
-(Exhibit: The Demand Curve for Capital) In the movement from A to B, a fall in the interest rate of _______ percentage points, resulted in an increase in the _______ for capital of _______ billion.

Accepted Answer

A)  4; demand; about $2.67 
B)  4; quantity demanded; about $2.67 
C)  6; demand; about $3.5 
D)  2.5; quantity demanded; $4

Question 11

When a firm decides to expand its capital stock, it can generally:

Accepted Answer

A)  use its own funds. 
B)  borrow the funds from a bank. 
C)  sell bonds. 
D)  do all of the above.

Question 12

Using slightly different notation than in the text, we could say that the present value (PV) of a payment n years in the future (FV), given interest rate (r), is given by the equation:

Accepted Answer

A)  PV = FVⁿ. 
B)  PV = 1 ÷ FVⁿ. 
C)  PV = FV ÷ (1 + r). 
D)  PV = FV ÷ (1 + r)ⁿ.

Question 13

Saving is:

Accepted Answer

A)  income not spent on consumption. 
B)  equal to consumption minus income during a particular period. 
C)  always a positive value. 
D)  A and B are true.

Question 14

Changes in the ________ for (of) capital affect the ________ market and changes in the ________ affect ________ capital.

Accepted Answer

A)  demand; loanable funds; loanable funds; demand curve for 
B)  demand; loanable funds; loanable funds; the quantity demanded of 
C)  supply; labor; labor; the quantity demanded of 
D)  None of the above are correct.

Question 15

Use the following to answer question(s): Loanable Funds and Capital Markets
 
-(Exhibit: Loanable Funds and Capital Markets) The increase in the demand for capital in Panel (b) most likely resulted from a(n):

Accepted Answer

A)  increase in the marginal product of capital. 
B)  increase in the marginal product of labor. 
C)  decrease in the price of labor. 
D)  increase in the price of capital

Question 16

If a firm considering the purchase of an asset determines that the asset's NPV > 0, ________ the asset will ________ profits.

Accepted Answer

A)  refusing to buy; increase 
B)  purchase of; increase 
C)  purchase of; decrease 
D)  sale of; increase

Question 17

The interest rate is determined in the market for loanable funds.

Accepted Answer

A) True 
 B)False

Question 18

A firm can profitably purchase an asset if the asset's net present value is:

Accepted Answer

A)  less than zero. 
B)  negative. 
C)  positive. 
D)  less than zero but greater than minus one.

Question 19

If Mega Corp.borrows for $9,000 in 2012 and agrees to pay the lender $10,500 in one year, the interest rate on this loan is approximately:

Accepted Answer

A)  8.6 percent. 
B)  14.3 percent. 
C)  16.7 percent. 
D)  not enough information to determine.

Question 20

Which of the following is (are) true?

Accepted Answer

A)  The NPV of an investment project is equal to the present value of its expected revenues minus the present value of its expected costs. 
B)  The demand curve for capital shows that firms demand a greater quantity of capital at higher interest rates. 
C)  Changes in technology cause movements along the demand for capital curve. 
D)  A and B are true.

Exam 13: Interest Rates and the Markets for Capital and Natural Resources

The amount paid to postpone the use of wealth divided by the amount of wealth whose use is postponed is a(n) :

The supply curve of land in a particular location is:

The owner of an exhaustible resource should current extraction rate if the expected price increase of the resource is the interest rate.

Use the following to answer question(s) : The Demand Curve for Capital -(Exhibit: The Demand Curve for Capital) The demand curve for capital would shift to the right if:

Use the following to answer question(s) : Loanable Funds and Capital Markets -(Exhibit: Loanable Funds and Capital Markets) If consumers decide to increase current consumption, this is reflected in Panel:

Use the following to answer question(s) : Loanable Funds and Capital Markets -(Exhibit: Loanable Funds and Capital Markets) A decrease in saving and a:

If consumption exceeds income, dissaving takes place.

Which of the following is (are) true?

The present value of a future payment decreases if the:

Use the following to answer question(s) : The Demand Curve for Capital -(Exhibit: The Demand Curve for Capital) In the movement from A to B, a fall in the interest rate of ___ percentage points, resulted in an increase in the _ for capital of _____ billion.

When a firm decides to expand its capital stock, it can generally:

Using slightly different notation than in the text, we could say that the present value (PV) of a payment n years in the future (FV) , given interest rate (r) , is given by the equation:

Saving is:

Changes in the for (of) capital affect the market and changes in the affect capital.

Use the following to answer question(s) : Loanable Funds and Capital Markets -(Exhibit: Loanable Funds and Capital Markets) The increase in the demand for capital in Panel (b) most likely resulted from a(n) :

If a firm considering the purchase of an asset determines that the asset's NPV > 0, the asset will profits.

The interest rate is determined in the market for loanable funds.

A firm can profitably purchase an asset if the asset's net present value is:

If Mega Corp.borrows for $9,000 in 2012 and agrees to pay the lender $10,500 in one year, the interest rate on this loan is approximately:

Which of the following is (are) true?

Exam 13: Interest Rates and the Markets for Capital and Natural Resources

The amount paid to postpone the use of wealth divided by the amount of wealth whose use is postponed is a(n) :

The supply curve of land in a particular location is:

The owner of an exhaustible resource should ________ current extraction rate if the expected price increase of the resource is ________ the interest rate.

Use the following to answer question(s) : The Demand Curve for Capital -(Exhibit: The Demand Curve for Capital) The demand curve for capital would shift to the right if:

Use the following to answer question(s) : Loanable Funds and Capital Markets -(Exhibit: Loanable Funds and Capital Markets) If consumers decide to increase current consumption, this is reflected in Panel:

Use the following to answer question(s) : Loanable Funds and Capital Markets -(Exhibit: Loanable Funds and Capital Markets) A decrease in saving and a:

If consumption exceeds income, dissaving takes place.

Which of the following is (are) true?

The present value of a future payment decreases if the:

Use the following to answer question(s) : The Demand Curve for Capital -(Exhibit: The Demand Curve for Capital) In the movement from A to B, a fall in the interest rate of _______ percentage points, resulted in an increase in the _______ for capital of _______ billion.

When a firm decides to expand its capital stock, it can generally:

Using slightly different notation than in the text, we could say that the present value (PV) of a payment n years in the future (FV) , given interest rate (r) , is given by the equation:

Saving is:

Changes in the ________ for (of) capital affect the ________ market and changes in the ________ affect ________ capital.

Use the following to answer question(s) : Loanable Funds and Capital Markets -(Exhibit: Loanable Funds and Capital Markets) The increase in the demand for capital in Panel (b) most likely resulted from a(n) :

If a firm considering the purchase of an asset determines that the asset's NPV > 0, ________ the asset will ________ profits.

The interest rate is determined in the market for loanable funds.

A firm can profitably purchase an asset if the asset's net present value is:

If Mega Corp.borrows for $9,000 in 2012 and agrees to pay the lender $10,500 in one year, the interest rate on this loan is approximately:

Which of the following is (are) true?

The owner of an exhaustible resource should current extraction rate if the expected price increase of the resource is the interest rate.

Use the following to answer question(s) : The Demand Curve for Capital -(Exhibit: The Demand Curve for Capital) In the movement from A to B, a fall in the interest rate of ___ percentage points, resulted in an increase in the _ for capital of _____ billion.

Changes in the for (of) capital affect the market and changes in the affect capital.

If a firm considering the purchase of an asset determines that the asset's NPV > 0, the asset will profits.