Exam 7: Finance, Saving, and Investment

National saving equals

The Acme Stereo Company had a capital stock of $24 million at the beginning of the year. At the end of the year, the firm had a capital stock of $20 million. Thus its

What is the influence of the expected profit and the real interest rate on the amount of investment firms make?

As the real interest rate increases, the quantity of loanable funds demanded . Therefore, the demand for loanable funds curve plotted against the real interest rate is .

Suppose the market for loanable funds is in equilibrium. If disposable income increases, the equilibrium real interest rate and the quantity of loanable funds .

-In the above figure, the demand for loanable funds curve is drawn for the average expected profit. If the real interest rate is constant at 6 percent and the expected profit falls, the amount of loanable funds demanded will be

What is the relationship between the real interest rate, the supply of loanable funds and the demand for loanable funds?

In the market for loanable funds, as the interest rate rises the and the .

At the beginning of the year, your wealth is $10,000. During the year, you have an income of $80,000 and you spend $90,000 on consumption. You pay no taxes. Your wealth at the end of the year is

Expected profit and the real interest rate affect investment decisions.

The Ricardo- Barro effect proposes that government budget deficits

In 2008, Germany had a budget deficit of 37 billion euros. This will budget deficit the supply of loanable funds and the real interest rate.

If the economy's capital stock increases over time,

If the nominal interest rate is 7 percent and the inflation rate is 2 percent, the real interest rate is approximately

An increase in disposable income shifts the supply of loanable funds curve

If the nominal interest rate is 7 percent and the inflation rate is 1 percent, the real interest rate is approximately

If the nominal interest rate is 8 percent and the current inflation rate is 3 percent, approximately what is the real interest rate?

In 2008, suppose Country A had net taxes of $30 million and government expenditures of $35 million. In addition, household saving in Country A totalled $5 million while consumption was $80 million. The government of Country A is running a budget and national saving is Million.

If the Ricardo- Barro effect is present, a government budget deficit raises the equilibrium real interest rate by and decreases the equilibrium quantity of investment by than if the Ricardo- Barro effect is absent.

If the government begins to run a larger budget deficits, then assuming there is no Ricardo- Barro effect, the demand for loanable funds and the real interest rate .