Question 1

Gross investment

Accepted Answer

A)  does not include additions to inventories. 
B)  includes only replacement investment. 
C)  is the purchase of new capital. 
D)  Both answers A and B are correct. 
A)  does not include additions to inventories. 
B)  includes only replacement investment. 
C)  is the purchase of new capital. 
D)  Both answers A and B are correct.

Question 2

The interest rate approximately equals the interest rate minus .

Accepted Answer

A)  nominal; real; depreciation 
B)  real; nominal; the inflation rate 
C)  real; nominal; depreciation 
D)  nominal; real; the inflation rate 
A)  nominal; real; depreciation 
B)  real; nominal; the inflation rate 
C)  real; nominal; depreciation 
D)  nominal; real; the inflation rate

Question 3

Other things remaining the same, the greater the expected profit from capital,

Accepted Answer

A)  the less the amount of investment. 
B)  the steeper is the investment demand curve. 
C)  the flatter is the investment demand curve. 
D)  the greater the amount of investment. 
A)  the less the amount of investment. 
B)  the steeper is the investment demand curve. 
C)  the flatter is the investment demand curve. 
D)  the greater the amount of investment.

Question 4

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

Accepted Answer

A)  $0. 
B)  $100,000.00. 
C)  $90,000.00. 
D)  $20,000.00. 
A)  $0. 
B)  $100,000.00. 
C)  $90,000.00. 
D)  $20,000.00.

Question 5

In January 2009, you can put your savings in a Bank of America account and be paid 2 percent per year. During 2009, suppose the inflation rate is 3.4 percent. In December, you will have earned a real interest rate of

Accepted Answer

A)  - 1.4 percent. 
B)  1.4 percent. 
C)  0.59 percent. 
D)  6.8 percent. 
A)  - 1.4 percent. 
B)  1.4 percent. 
C)  0.59 percent. 
D)  6.8 percent.

Question 6

Which of the following have a positive relationship with household saving?
I. the real interest rate
II. disposable income
III. expected future income

Accepted Answer

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

Question 7

The equilibrium real interest rate is determined by the

Accepted Answer

A)  government spending curve and the taxing curve. 
B)  demand for loanable funds curve and the supply of loanable funds curve. 
C)  demand for loanable funds curve and the consumption demand curve. 
D)  consumption demand curve and the supply of loanable funds curve. 
A)  government spending curve and the taxing curve. 
B)  demand for loanable funds curve and the supply of loanable funds curve. 
C)  demand for loanable funds curve and the consumption demand curve. 
D)  consumption demand curve and the supply of loanable funds curve.

Question 8

A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from

Accepted Answer

A)  tax cuts. 
B)  decreases in the expected profit. 
C)  an increase in the real interest rate. 
D)  technological improvements. 
A)  tax cuts. 
B)  decreases in the expected profit. 
C)  an increase in the real interest rate. 
D)  technological improvements.

Question 9

Does a change in the real interest rate shift the supply of loanable funds curve? Explain your answer.

Accepted Answer

A change in the real interest rate does

Question 10

Which of the following is NOT a determinant of household saving?

Accepted Answer

A)  the nominal interest rate 
B)  the household's wealth 
C)  expected future income 
D)  disposable income 
A)  the nominal interest rate 
B)  the household's wealth 
C)  expected future income 
D)  disposable income

Question 11

The economy of Dream Island, which is isolated from the rest of the world, has the supply of loanable funds sch and the demand for loanable funds schedule shown in the table above. As it happens, all of the supply of loanab are from households' saving and the entre demand for loanable funds is from firms' investment demand.
a) Draw the demand and supply curves.
b) What is the equilibrium real interest rate?
c) What is equilibrium investment? Equilibrium saving?
d) Describe the situation in Dream Island's loanable funds market when the real interest rate is 10 percent. Is th shortage of loanable funds? A surplus of loanable funds?
e) Describe the situation in Dream Island's capital market when the real interest rate is 6 percent. Is there a shor loanable funds? A surplus of loanable funds?

Accepted Answer

c) The equilibrium amount of investment

Question 12

A decrease in disposable income _.

Accepted Answer

A)  has no effect on the supply of loanable funds curve 
B)  results in movement up the supply of loanable funds curve 
C)  shifts the supply of loanable funds curve rightward 
D)  shifts the supply of loanable funds curve leftward 
A)  has no effect on the supply of loanable funds curve 
B)  results in movement up the supply of loanable funds curve 
C)  shifts the supply of loanable funds curve rightward 
D)  shifts the supply of loanable funds curve leftward

Question 13

National saving is defined as

Accepted Answer

A)  the saving by the federal government. 
B)  saving by households and businesses plus government saving. 
C)  the total amount of household saving. 
D)  None of the above answers are correct. 
A)  the saving by the federal government. 
B)  saving by households and businesses plus government saving. 
C)  the total amount of household saving. 
D)  None of the above answers are correct.

Question 14

When a government has a budget surplus, the surplus

Accepted Answer

A)  must be subtracted from private saving. 
B)  helps finance investment. 
C)  increases the world real interest rate. 
D)  crowds- out private saving. 
A)  must be subtracted from private saving. 
B)  helps finance investment. 
C)  increases the world real interest rate. 
D)  crowds- out private saving.

Question 15

The Ricardo- Barro effect of a government budget deficit refers to

Accepted Answer

A)  the international impact of government deficits. 
B)  a change in private savings supply. 
C)  a large crowding out effect from a government budget deficit. 
D)  a large crowding out effect from a government budget surplus. 
A)  the international impact of government deficits. 
B)  a change in private savings supply. 
C)  a large crowding out effect from a government budget deficit. 
D)  a large crowding out effect from a government budget surplus.

Question 16

-In the above figure, if the real interest rate was 8, there would be

Accepted Answer

A)  a shortage of loanable funds. 
B)  a surplus of loanable funds. 
C)  underproduction in this economy. 
D)  a shortage in available funds for investment. 
A)  a shortage of loanable funds. 
B)  a surplus of loanable funds. 
C)  underproduction in this economy. 
D)  a shortage in available funds for investment.

Question 17

The physical capital in the economy is the total

Accepted Answer

A)  financial assets held by firms. 
B)  quantity of plant and equipment owned by governments. 
C)  quantity of plant, equipment, and inventories. 
D)  financial assets of the public. 
A)  financial assets held by firms. 
B)  quantity of plant and equipment owned by governments. 
C)  quantity of plant, equipment, and inventories. 
D)  financial assets of the public.

Question 18

In 2008, the financial and housing crisis caused firms to decrease their profit expectations. As a result, there is a in the _ for loanable funds curve.

Accepted Answer

A)  leftward shift; demand. 
B)  leftward shift; supply. 
C)  movement upward along; demand. 
D)  movement downward along; supply. 
A)  leftward shift; demand. 
B)  leftward shift; supply. 
C)  movement upward along; demand. 
D)  movement downward along; supply.

Question 19

The amount of by households will be less .

Accepted Answer

A)  saving; the lower is the real interest rate 
B)  consumption; the higher is disposable income 
C)  saving; the higher is disposable income 
D)  consumption; the lower is the inflation rate 
A)  saving; the lower is the real interest rate 
B)  consumption; the higher is disposable income 
C)  saving; the higher is disposable income 
D)  consumption; the lower is the inflation rate

Question 20

Saving by households

Accepted Answer

A)  decreases when the real interest rate rises. 
B)  is unaffected by the real interest rate. 
C)  increases when the real interest rate falls. 
D)  increases when the real interest rate rises. 
A)  decreases when the real interest rate rises. 
B)  is unaffected by the real interest rate. 
C)  increases when the real interest rate falls. 
D)  increases when the real interest rate rises.

Gross investment

The interest rate approximately equals the interest rate minus .

Other things remaining the same, the greater the expected profit from capital,

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

In January 2009, you can put your savings in a Bank of America account and be paid 2 percent per year. During 2009, suppose the inflation rate is 3.4 percent. In December, you will have earned a real interest rate of

Which of the following have a positive relationship with household saving? I. the real interest rate II. disposable income III. expected future income

The equilibrium real interest rate is determined by the

A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from

Does a change in the real interest rate shift the supply of loanable funds curve? Explain your answer.

Which of the following is NOT a determinant of household saving?

A decrease in disposable income _.

National saving is defined as

When a government has a budget surplus, the surplus

The Ricardo- Barro effect of a government budget deficit refers to

-In the above figure, if the real interest rate was 8, there would be

The physical capital in the economy is the total

In 2008, the financial and housing crisis caused firms to decrease their profit expectations. As a result, there is a in the _ for loanable funds curve.

The amount of by households will be less .

Saving by households

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

Gross investment

The interest rate approximately equals the interest rate minus .

Other things remaining the same, the greater the expected profit from capital,

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

In January 2009, you can put your savings in a Bank of America account and be paid 2 percent per year. During 2009, suppose the inflation rate is 3.4 percent. In December, you will have earned a real interest rate of

Which of the following have a positive relationship with household saving? I. the real interest rate II. disposable income III. expected future income

The equilibrium real interest rate is determined by the

A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from

Does a change in the real interest rate shift the supply of loanable funds curve? Explain your answer.

Which of the following is NOT a determinant of household saving?

A decrease in disposable income _.

National saving is defined as

When a government has a budget surplus, the surplus

The Ricardo- Barro effect of a government budget deficit refers to

-In the above figure, if the real interest rate was 8, there would be

The physical capital in the economy is the total

In 2008, the financial and housing crisis caused firms to decrease their profit expectations. As a result, there is a in the _ for loanable funds curve.

The amount of by households will be less .

Saving by households

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