Question 1

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

Accepted Answer

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

Question 2

Investment is financed by which of the following?
I. Government spending
II. National saving
III. Borrowing from the rest of the world

Accepted Answer

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

Question 3

-In the above figure, if the real interest rate is 8, there is

Accepted Answer

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

Question 4

Suppose that expected profit decreases. This change means

Accepted Answer

A)  the supply curve for loanable funds shifts rightward and the nominal interest rate rises. 
B)  the real interest rate rises as saving increases. 
C)  the demand curve for loanable funds shifts leftward and the real interest rate falls. 
D)  there is a movement down along the demand curve for loanable funds. 
A)  the supply curve for loanable funds shifts rightward and the nominal interest rate rises. 
B)  the real interest rate rises as saving increases. 
C)  the demand curve for loanable funds shifts leftward and the real interest rate falls. 
D)  there is a movement down along the demand curve for loanable funds.

Question 5

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.

Accepted Answer

The formula showing how households can d

Question 6

The supply of loanable funds is the relationship between loanable funds and other things remaining the same.

Accepted Answer

A)  the price level 
B)  the real interest rate 
C)  the inflation rate 
D)  real GDP 
A)  the price level 
B)  the real interest rate 
C)  the inflation rate 
D)  real GDP

Question 7

How does an increase in the expected profit affect investment demand and the demand for loanable funds curve?

Accepted Answer

An increase in the expected profit incre

Question 8

Suppose a bond promises to pay its holder $100 a year forever. The interest rate on the bond rises from 4 percent to 5 percent. The price of the bond

Accepted Answer

A)  rises from $2,000 to $2,500. 
B)  does not change because it is not affected by the interest rate. 
C)  falls from $25,000 to $20,000. 
D)  falls from $2,500 to $2,000. 
A)  rises from $2,000 to $2,500. 
B)  does not change because it is not affected by the interest rate. 
C)  falls from $25,000 to $20,000. 
D)  falls from $2,500 to $2,000.

Question 9

According to the Ricardo-Barro effect,

Accepted Answer

A)  government budget deficits increase householdsʹ expected future disposable income. 
B)  taxpayers fail to foresee that government deficits imply higher future taxes. 
C)  government deficits raise the real interest rate. 
D)  households increase their personal saving when governments run budget deficits. 
A)  government budget deficits increase householdsʹ expected future disposable income. 
B)  taxpayers fail to foresee that government deficits imply higher future taxes. 
C)  government deficits raise the real interest rate. 
D)  households increase their personal saving when governments run budget deficits.

Question 10

In January, suppose that a share of stock in Meyer, Inc. had a price of $50 and that each share entitled its owner to $2 of Meyer, Inc.ʹs profit. During the year, the price of a share of Meyerʹs stock rose to $100. The interest rate paid on the share in January was percent.

Accepted Answer

A)  0.02 
B)  2 
C)  25 
D)  4 
A)  0.02 
B)  2 
C)  25 
D)  4

Question 11

In November 2008, automobile executives from Ford, GM and Chrysler testified to Congress that their firms needed a $25 billion bailout to prevent bankruptcies. The executives stated that part of the cash would be used to re-design production lines. The $25 billion is and the
Re-designed production lines are .

Accepted Answer

A)  physical capital; financial capital 
B)  net investment; gross investment 
C)  gross investment; physical capital 
D)  financial capital; physical capital 
A)  physical capital; financial capital 
B)  net investment; gross investment 
C)  gross investment; physical capital 
D)  financial capital; physical capital

Question 12

Real interest rates around the world tend to

Accepted Answer

A)  be equal after adjusting for differences in risk because financial capital seeks the highest possible return. 
B)  be quite different because no two countries are exactly the same. 
C)  be equal because trading partners would not do business otherwise. 
D)  differ because inflation rates differ across countries. 
A)  be equal after adjusting for differences in risk because financial capital seeks the highest possible return. 
B)  be quite different because no two countries are exactly the same. 
C)  be equal because trading partners would not do business otherwise. 
D)  differ because inflation rates differ across countries.

Question 13

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 2009 you earned a real interest rate of

Accepted Answer

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

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

Investment is financed by which of the following? I. Government spending II. National saving III. Borrowing from the rest of the world

-In the above figure, if the real interest rate is 8, there is

Suppose that expected profit decreases. This change means

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.

The supply of loanable funds is the relationship between loanable funds and other things remaining the same.

How does an increase in the expected profit affect investment demand and the demand for loanable funds curve?

Suppose a bond promises to pay its holder $100 a year forever. The interest rate on the bond rises from 4 percent to 5 percent. The price of the bond

According to the Ricardo-Barro effect,

In January, suppose that a share of stock in Meyer, Inc. had a price of $50 and that each share entitled its owner to $2 of Meyer, Inc.ʹs profit. During the year, the price of a share of Meyerʹs stock rose to $100. The interest rate paid on the share in January was percent.

Real interest rates around the world tend to

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 2009 you earned a real interest rate of

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

Exam 7: Finance, Saving, and Investment

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

Investment is financed by which of the following? I. Government spending II. National saving III. Borrowing from the rest of the world

-In the above figure, if the real interest rate is 8, there is

Suppose that expected profit decreases. This change means

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.

The supply of loanable funds is the relationship between loanable funds and other things remaining the same.

How does an increase in the expected profit affect investment demand and the demand for loanable funds curve?

Suppose a bond promises to pay its holder $100 a year forever. The interest rate on the bond rises from 4 percent to 5 percent. The price of the bond

According to the Ricardo-Barro effect,

In January, suppose that a share of stock in Meyer, Inc. had a price of $50 and that each share entitled its owner to $2 of Meyer, Inc.ʹs profit. During the year, the price of a share of Meyerʹs stock rose to $100. The interest rate paid on the share in January was percent.

Real interest rates around the world tend to

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 2009 you earned a real interest rate of

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters