Question 1

Which of the following approximately equals the real interest rate?

Accepted Answer

A)  the nominal interest rate plus the inflation rate 
B)  the nominal interest rate minus the growth rate of GDP 
C)  the rate paid when the best customers of banks borrow money 
D)  the nominal interest rate minus the inflation rate 
A)  the nominal interest rate plus the inflation rate 
B)  the nominal interest rate minus the growth rate of GDP 
C)  the rate paid when the best customers of banks borrow money 
D)  the nominal interest rate minus the inflation rate

Question 2

increases households' saving.

Accepted Answer

A)  A stock market boom that increases the purchasing power of households' wealth 
B)  A decrease in the real interest rate 
C)  Higher expected future income 
D)  A tax cut that increases disposable income 
A)  A stock market boom that increases the purchasing power of households' wealth 
B)  A decrease in the real interest rate 
C)  Higher expected future income 
D)  A tax cut that increases disposable income

Question 3

In 2007, France's GDP totalled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in each year was $357 billion (2007) and $335 billion (2006). Suppose that depreciation is 12 percent of GDP. _ _ investment in 2007 was _ billion.

Accepted Answer

A)  Net; $129 
B)  Gross; $216 
C)  Net; $228 
D)  Gross; $129 
A)  Net; $129 
B)  Gross; $216 
C)  Net; $228 
D)  Gross; $129

Question 4

A decrease in the real interest rate leads to a the demand for loanable funds curve, and a decrease in the expected profit leads to a the demand for loanable funds curve.

Accepted Answer

A)  movement down along; movement up along 
B)  movement down along; leftward shift in 
C)  rightward shift in; leftward shift in 
D)  rightward shift in; movement up along 
A)  movement down along; movement up along 
B)  movement down along; leftward shift in 
C)  rightward shift in; leftward shift in 
D)  rightward shift in; movement up along

Question 5

Explain how each of the following events affect the supply of loanable funds curve:
a) The economy is in a recession so people's disposable income is lower.
b) The stock market is booming so the people's wealth is higher.
c) Fewer college graduates are finding jobs so expected future income is lower.
d) The real interest rate increases.

Accepted Answer

a) Disposable income is lower, so saving

Question 6

In the market for loanable funds, an increase in wealth shifts the loanable funds curve
)

Accepted Answer

A)  supply of; rightward 
B)  supply of; leftward 
C)  demand for; leftward 
D)  demand for; rightward 
A)  supply of; rightward 
B)  supply of; leftward 
C)  demand for; leftward 
D)  demand for; rightward

Question 7

The demand for loanable funds is the relationship between loanable funds and the other things remaining the same.

Accepted Answer

A)  inflation rate 
B)  price level 
C)  nominal interest rate 
D)  real interest rate 
A)  inflation rate 
B)  price level 
C)  nominal interest rate 
D)  real interest rate

Question 8

If the real interest rate is above the equilibrium real interest rate,

Accepted Answer

A)  lenders will be unable to find borrowers willing to borrow all of the available funds and the real interest rate will rise. 
B)  lenders will be unable to find borrowers willing to borrow all of the available funds and the real interest rate will fall. 
C)  borrowers will be unable to borrow all of the funds they want to borrow and the real interest rate will rise. 
D)  borrowers will be unable to borrow all of the funds they want to borrow and the real interest rate will fall. 
A)  lenders will be unable to find borrowers willing to borrow all of the available funds and the real interest rate will rise. 
B)  lenders will be unable to find borrowers willing to borrow all of the available funds and the real interest rate will fall. 
C)  borrowers will be unable to borrow all of the funds they want to borrow and the real interest rate will rise. 
D)  borrowers will be unable to borrow all of the funds they want to borrow and the real interest rate will fall.

Question 9

The nominal interest rate is approximately equal to the real interest rate minus the inflation rate.

Accepted Answer

A) True 
 B)False

Question 10

As a result of the recession in 2008, the default risk increased. How did this change affect the loanable funds market?

Accepted Answer

A)  There was a movement down along the demand for loanable funds curve. 
B)  There was a movement up along the supply of loanable funds curve. 
C)  There was a leftward shift in the supply of loanable funds curve. 
D)  There was a rightward shift in the supply of loanable funds curve. 
A)  There was a movement down along the demand for loanable funds curve. 
B)  There was a movement up along the supply of loanable funds curve. 
C)  There was a leftward shift in the supply of loanable funds curve. 
D)  There was a rightward shift in the supply of loanable funds curve.

Question 11

If national saving (S) is $100,000, net taxes (T) equal $100,000 and government expenditure (G) is
$25,000, how much are households and businesses saving?

Accepted Answer

A)  $25,000. 
B)  - $25,000. 
C)  $225,000. 
D)  none of the above 
A)  $25,000. 
B)  - $25,000. 
C)  $225,000. 
D)  none of the above

Question 12

The Ricardo- Barro effects assets that government

Accepted Answer

A)  expenditure affects private expenditure. 
B)  budget deficits crowd out private borrowing. 
C)  taxation raises interest rates. 
D)  saving affects private saving. 
A)  expenditure affects private expenditure. 
B)  budget deficits crowd out private borrowing. 
C)  taxation raises interest rates. 
D)  saving affects private saving.

Question 13

Initially the nominal interest rate is 8 percent and the inflation rate is 5 percent. People know that the inflation rate increases to 10 percent. What is the new nominal interest rate?

Accepted Answer

A)  3 percent 
B)  13 percent 
C)  11 percent 
D)  8 percent 
A)  3 percent 
B)  13 percent 
C)  11 percent 
D)  8 percent

Question 14

The increase in the capital stock equals the amount of

Accepted Answer

A)  net investment. 
B)  private sector spending. 
C)  depreciation. 
D)  gross investment. 
A)  net investment. 
B)  private sector spending. 
C)  depreciation. 
D)  gross investment.

Question 15

If China's government runs a budget surplus and there is no Ricardo- Barro effect, there will be
In the supply of loanable funds, private saving _ _ and investment .

Accepted Answer

A)  an increase; increases; increases 
B)  a decrease; decrease; increases 
C)  a decrease; increases; increases 
D)  an increase; decreases; increases 
A)  an increase; increases; increases 
B)  a decrease; decrease; increases 
C)  a decrease; increases; increases 
D)  an increase; decreases; increases

Question 16

-In the above figure, the initial supply of loanable funds curve is SLF0 and the demand for loanable funds investment curve is DLF0. An increase in the real interest rate to 7 percent could be caused by

Accepted Answer

A)  a decrease in the expected profit. 
B)  an increase in investment demand. 
C)  an increase in people's disposable incomes. 
D)  an expansion that increased both saving and investment by the same amount. 
A)  a decrease in the expected profit. 
B)  an increase in investment demand. 
C)  an increase in people's disposable incomes. 
D)  an expansion that increased both saving and investment by the same amount.

Question 17

In the market for loanable funds, if the interest rate is above the equilibrium level

Accepted Answer

A)  government expenditure decreases. 
B)  there is a surplus of loanable funds. 
C)  there is a shortage of loanable funds. 
D)  expected profit falls. 
A)  government expenditure decreases. 
B)  there is a surplus of loanable funds. 
C)  there is a shortage of loanable funds. 
D)  expected profit falls.

Question 18

If households believe they will experience higher income in the near future, the result is a

Accepted Answer

A)  leftward shift in the supply of loanable funds curve. 
B)  rightward shift in the supply of loanable funds curve. 
C)  movement along the demand for loanable funds curve. 
D)  movement along the supply of loanable funds curve. 
A)  leftward shift in the supply of loanable funds curve. 
B)  rightward shift in the supply of loanable funds curve. 
C)  movement along the demand for loanable funds curve. 
D)  movement along the supply of loanable funds curve.

Question 19

Which of the following are major influences on the expected profit from an investment?
I. technology advances
II. stock market behavior
III. accounting practices

Accepted Answer

A)  I and II 
B)  II and III 
C)  I only 
D)  I and III 
A)  I and II 
B)  II and III 
C)  I only 
D)  I and III

Question 20

The term "crowding out" relates to

Accepted Answer

A)  decreases in private investment because of a government budget deficit. 
B)  an effect of a government budget deficit. 
C)  increases in the real interest rate due to government budget deficit. 
D)  All of the above answers are correct. 
A)  decreases in private investment because of a government budget deficit. 
B)  an effect of a government budget deficit. 
C)  increases in the real interest rate due to government budget deficit. 
D)  All of the above answers are correct.

Which of the following approximately equals the real interest rate?

increases households' saving.

In 2007, France's GDP totalled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in each year was $357 billion (2007) and $335 billion (2006). Suppose that depreciation is 12 percent of GDP. _ _ investment in 2007 was _ billion.

A decrease in the real interest rate leads to a the demand for loanable funds curve, and a decrease in the expected profit leads to a the demand for loanable funds curve.

In the market for loanable funds, an increase in wealth shifts the loanable funds curve )

The demand for loanable funds is the relationship between loanable funds and the other things remaining the same.

If the real interest rate is above the equilibrium real interest rate,

The nominal interest rate is approximately equal to the real interest rate minus the inflation rate.

As a result of the recession in 2008, the default risk increased. How did this change affect the loanable funds market?

If national saving (S) is $100,000, net taxes (T) equal $100,000 and government expenditure (G) is $25,000, how much are households and businesses saving?

The Ricardo- Barro effects assets that government

Initially the nominal interest rate is 8 percent and the inflation rate is 5 percent. People know that the inflation rate increases to 10 percent. What is the new nominal interest rate?

The increase in the capital stock equals the amount of

If China's government runs a budget surplus and there is no Ricardo- Barro effect, there will be In the supply of loanable funds, private saving _ _ and investment .

-In the above figure, the initial supply of loanable funds curve is SLF₀and the demand for loanable funds investment curve is DLF₀. An increase in the real interest rate to 7 percent could be caused by

In the market for loanable funds, if the interest rate is above the equilibrium level

If households believe they will experience higher income in the near future, the result is a

Which of the following are major influences on the expected profit from an investment? I. technology advances II. stock market behavior III. accounting practices

The term "crowding out" relates to

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 7: Finance, Saving, and Investment

Which of the following approximately equals the real interest rate?

increases households' saving.

In 2007, France's GDP totalled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in each year was $357 billion (2007) and $335 billion (2006). Suppose that depreciation is 12 percent of GDP. _ _ investment in 2007 was _ billion.

A decrease in the real interest rate leads to a the demand for loanable funds curve, and a decrease in the expected profit leads to a the demand for loanable funds curve.

In the market for loanable funds, an increase in wealth shifts the loanable funds curve )

The demand for loanable funds is the relationship between loanable funds and the other things remaining the same.

If the real interest rate is above the equilibrium real interest rate,

The nominal interest rate is approximately equal to the real interest rate minus the inflation rate.

As a result of the recession in 2008, the default risk increased. How did this change affect the loanable funds market?

If national saving (S) is $100,000, net taxes (T) equal $100,000 and government expenditure (G) is $25,000, how much are households and businesses saving?

The Ricardo- Barro effects assets that government

Initially the nominal interest rate is 8 percent and the inflation rate is 5 percent. People know that the inflation rate increases to 10 percent. What is the new nominal interest rate?

The increase in the capital stock equals the amount of

If China's government runs a budget surplus and there is no Ricardo- Barro effect, there will be In the supply of loanable funds, private saving _ _ and investment .

-In the above figure, the initial supply of loanable funds curve is SLF0 and the demand for loanable funds investment curve is DLF0. An increase in the real interest rate to 7 percent could be caused by

In the market for loanable funds, if the interest rate is above the equilibrium level

If households believe they will experience higher income in the near future, the result is a

Which of the following are major influences on the expected profit from an investment? I. technology advances II. stock market behavior III. accounting practices

The term "crowding out" relates to

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

-In the above figure, the initial supply of loanable funds curve is SLF₀and the demand for loanable funds investment curve is DLF₀. An increase in the real interest rate to 7 percent could be caused by