Exam 7: Finance, Saving, and Investment

When the real interest rate rises

"An increase in the real interest rate increases the quantity of investment." Is the previous statement correct or incorrect?

People expect an inflation rate of 5 percent and the real interest rate is positive. Then the nominal interest rate will be

If the nominal interest rate is 10 percent and inflation is 7 percent, the real interest rate is approximately

Households will choose to save more if

If households expect an increase in their future incomes, they will save

In 2008, Germany had a budget deficit of 37 billion euros. This deficit resulted in

Which of the following is true? I. As the real interest rate increases, people increase the quantity they save. II. The supply of loanable funds curve is downward sloping. III. As disposable income increases, the supply of loanable funds curve becomes steeper.

Suppose that expected profit decreases. This change means

Loanable funds originate from i. private saving by households. ii. loaning by domestic households to foreigners. iii. government budget surpluses.

Which of the following are included in the supply of loanable funds? i. private saving ii. government budget surplus iii. international borrowing

An increase in the real interest rate the quantity of loanable funds supplied and _ the quantity of loanable funds demanded.

The term capital, as used in macroeconomics, includes all of the following EXCEPT

Begin with the formula showing how households can divide their income. Then use this formula and the expenditure approach to GDP to show how investment is financed from three sources.

If people expect an inflation rate of 3.3 percent, and the real interest rate is 3 percent, the nominal interest rate equals (approximately)

France's government is running a budget deficit. With no Ricardo- Barro effect, which of the following events will occur? i. The supply curve of loanable funds will shift leftward. ii. A higher real interest rate crowds out investment. iii. Saving increases.

Suppose that, initially, the nominal interest rate is 6 percent and the inflation rate is 3 percent. If the inflation rate increases to 6 percent, what will be the new nominal interest rate?

According to the Ricardo- Barro effect,

What are the factors that change investment demand and shift the demand for loanable funds curve?

A decrease in the government budget deficit decreases the loanable funds and an increase in the government budget surplus increases the loanable funds.