Question 1

If the supply of loanable funds curve shifts rightward from the curve shown in the figure above, the shift could be the result of

Accepted Answer

A) a rise in expected future income. 
B) an increase in disposable income. 
C) a decrease in the supply of loanable funds. 
D) a decrease in the demand for loanable funds. 
E) an increase in wealth. 
A) a rise in expected future income. 
B) an increase in disposable income. 
C) a decrease in the supply of loanable funds. 
D) a decrease in the demand for loanable funds. 
E) an increase in wealth. B

Question 2

A decrease in expected profit

Accepted Answer

A) increases the demand for loanable funds. 
B) lowers the equilibrium real interest rate. 
C) increases the supply of loanable funds. 
D) raises the equilibrium real interest rate. 
E) decreases the supply of loanable funds. 
A) increases the demand for loanable funds. 
B) lowers the equilibrium real interest rate. 
C) increases the supply of loanable funds. 
D) raises the equilibrium real interest rate. 
E) decreases the supply of loanable funds. B

Question 3

If the real interest rate

Accepted Answer

A) rises, the supply of loanable funds curve shifts rightward. 
B) falls, the supply of loanable funds curve shifts leftward. 
C) falls, there is a movement along the supply of loanable funds curve to a higher quantity of saving. 
D) falls, there is a movement along the supply curve of loanable funds to a lower quantity of loanable funds . 
E) rises, the supply of loanable funds curve shifts leftward. 
A) rises, the supply of loanable funds curve shifts rightward. 
B) falls, the supply of loanable funds curve shifts leftward. 
C) falls, there is a movement along the supply of loanable funds curve to a higher quantity of saving. 
D) falls, there is a movement along the supply curve of loanable funds to a lower quantity of loanable funds . 
E) rises, the supply of loanable funds curve shifts leftward. D

Question 4

Economists use the term wealth to mean

Accepted Answer

A) what a person earns. 
B) the amount of income that is spent and not saved. 
C) a person's investment. 
D) what a person owns. 
E) the same thing as income. 
A) what a person earns. 
B) the amount of income that is spent and not saved. 
C) a person's investment. 
D) what a person owns. 
E) the same thing as income.

Question 5

$\begin{array} { c c c } 
\hline \begin{array} { c } 
\text { Real interest rate } \
\text { (percent per year) }
\end{array} & \begin{array} { c } 
\text { Demand for loanable funds  } \
\text { (billions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } \text { Supply of loanable funds}\
\text { (billions of } \
\text { 2005 dollars) }
\end{array} \
\hline 3 & 750 & 450 \
4 & 700 & 500 \
5 & 650 & 550 \
6 & 600 & 600 \
7 & 550 & 650 \
8 & 500 & 700 \
9 & 450 & 750 \
\hline
\end{array}$

The above table has the private demand for loanable funds and the private supply of loanable funds schedules.
- If the government budget deficit is $200 billion, and there is a Ricardo-Barro effect, the equilibrium real interest rate is and the equilibrium quantity of loanable funds is--------------------.

Accepted Answer

A) 4 percent; $500 billion 
B) 6 percent; $600 billion 
C) 8 percent; $700 billion 
D) 8 percent, $500 billion 
E) 4 percent; $700 billion 
A) 4 percent; $500 billion 
B) 6 percent; $600 billion 
C) 8 percent; $700 billion 
D) 8 percent, $500 billion 
E) 4 percent; $700 billion

Question 6

As the economy enters an expansion so that people's expected future incomes rise, there will be

Accepted Answer

A) a leftward shift in the supply of loanable funds curve. 
B) an increase in the supply of loanable funds. 
C) a leftward shift in the demand for loanable funds curve. 
D) a decrease in the nominal interest rate. 
E) None of the above answers are correct. 
A) a leftward shift in the supply of loanable funds curve. 
B) an increase in the supply of loanable funds. 
C) a leftward shift in the demand for loanable funds curve. 
D) a decrease in the nominal interest rate. 
E) None of the above answers are correct.

Question 7

A document that promises to pay specified sums of money on specified dates and is a debt to the Issuer is called

Accepted Answer

A) a bond. 
B) gross investment. 
C) depreciation. 
D) a stock. 
E) net investment. 
A) a bond. 
B) gross investment. 
C) depreciation. 
D) a stock. 
E) net investment.

Question 8

Other things remaining the same, the ----------------------------------------the real interest rate, the

Accepted Answer

A) higher; greater the quantity of loanable funds demanded 
B) lower; greater the quantity of loanable funds demanded 
C) lower; greater the quantity of loanable funds supplied 
D) lower; greater the demand for loanable funds 
E) higher; greater the demand for loanable funds 
A) higher; greater the quantity of loanable funds demanded 
B) lower; greater the quantity of loanable funds demanded 
C) lower; greater the quantity of loanable funds supplied 
D) lower; greater the demand for loanable funds 
E) higher; greater the demand for loanable funds

Question 9

Net investment equals

Accepted Answer

A) gross investment minus depreciation. 
B) capital plus depreciation. 
C) the amount of national wealth. 
D) new capital plus old capital. 
E) gross investment plus depreciation. 
A) gross investment minus depreciation. 
B) capital plus depreciation. 
C) the amount of national wealth. 
D) new capital plus old capital. 
E) gross investment plus depreciation.

Question 10

The figure above shows the loanable funds market. 
-At an interest rate of

Accepted Answer

A) 8 percent the quantity of loanable funds supplied is $14 trillion. 
B) 6 percent savers will exit the market because the reward to saving is too low. 
C) 4 percent there is a surplus of loanable funds. 
D) 8 percent the quantity demanded of loanable funds is $18 trillion. 
E) 4 percent there is a shortage of loanable funds. 
A) 8 percent the quantity of loanable funds supplied is $14 trillion. 
B) 6 percent savers will exit the market because the reward to saving is too low. 
C) 4 percent there is a surplus of loanable funds. 
D) 8 percent the quantity demanded of loanable funds is $18 trillion. 
E) 4 percent there is a shortage of loanable funds.

Question 11

The real interest rate is--------------------related to the supply of loanable funds because--------------------

Accepted Answer

A) negatively; the opportunity cost of consumption expenditure increases as the real interest rate rises 
B) positively; people are motivated to increase their consumption expenditure as the real interest rate rises 
C) negatively; people are motivated to save more as the real interest rate rises 
D) positively; the opportunity cost of consumption expenditure increases as the real interest rate rises 
E) None of the above answers are correct. 
A) negatively; the opportunity cost of consumption expenditure increases as the real interest rate rises 
B) positively; people are motivated to increase their consumption expenditure as the real interest rate rises 
C) negatively; people are motivated to save more as the real interest rate rises 
D) positively; the opportunity cost of consumption expenditure increases as the real interest rate rises 
E) None of the above answers are correct.

Question 12

If there is no Ricardo-Barro effect, a government budget surplus-------------------- the supply of loanable funds and-------------------- equilibrium investment.

Accepted Answer

A) does not change; does not change 
B) increases; increases 
C) decreases; decreases 
D) increases; decreases 
E) decreases; increases 
A) does not change; does not change 
B) increases; increases 
C) decreases; decreases 
D) increases; decreases 
E) decreases; increases

Question 13

The crowding-out effect is the tendency for

Accepted Answer

A) higher government budget deficits to increase total savings. 
B) higher private savings to decrease government budget surpluses. 
C) lower private saving to decrease investment. 
D) higher government budget deficits to decrease investment. 
E) lower private saving to increase the budget deficit. 
A) higher government budget deficits to increase total savings. 
B) higher private savings to decrease government budget surpluses. 
C) lower private saving to decrease investment. 
D) higher government budget deficits to decrease investment. 
E) lower private saving to increase the budget deficit.

Question 14

If expectations about future income change, there is

Accepted Answer

A) an increase in saving if people expect income to increase in the future. 
B) a decrease saving if people expect income to decrease in the future. 
C) a change in the quantity of loanable funds supplied and a movement along the supply of loanable funds curve. 
D) no change in saving until income actually changes. 
E) a decrease in saving if people expect income to increase in the future. 
A) an increase in saving if people expect income to increase in the future. 
B) a decrease saving if people expect income to decrease in the future. 
C) a change in the quantity of loanable funds supplied and a movement along the supply of loanable funds curve. 
D) no change in saving until income actually changes. 
E) a decrease in saving if people expect income to increase in the future.

Question 15

When--------------------changes, the supply of loanable funds curve shifts.

Accepted Answer

A) the price level 
B) people's expected future income 
C) investment 
D) the expected rate of profit 
E) "animal spirits" 
A) the price level 
B) people's expected future income 
C) investment 
D) the expected rate of profit 
E) "animal spirits"

Question 16

Technological change can increase the demand for loanable funds because it

Accepted Answer

A) lowers the interest rate. 
B) increases people's expected future disposable income. 
C) can increase the expected profit. 
D) has little effect on production cost. 
E) decreases the need for additional equipment. 
A) lowers the interest rate. 
B) increases people's expected future disposable income. 
C) can increase the expected profit. 
D) has little effect on production cost. 
E) decreases the need for additional equipment.

Question 17

In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve.
- If there is no ricardo-Barro effect and the government now runs a balanced budget, the

Accepted Answer

A) there is shortage of investment funds of $0.4 trillion. 
B) interest rate will increase from 4 percent to 6 percent. 
C) there is a surplus of investment funds and the interest rate falls to 4 percent. 
D) equilibrium interest rate is 4 percent and investment is $1.8 trillion. 
E) equilibrium interest rate is 6 percent and investment is $1.6 trillion. 
A) there is shortage of investment funds of $0.4 trillion. 
B) interest rate will increase from 4 percent to 6 percent. 
C) there is a surplus of investment funds and the interest rate falls to 4 percent. 
D) equilibrium interest rate is 4 percent and investment is $1.8 trillion. 
E) equilibrium interest rate is 6 percent and investment is $1.6 trillion.

Question 18

As a result of the government's rescue of financial firms and the auto industry in 2008, which of the following occurred?
i.The government's demand for loanable funds increased the real interest rate.
ii.Investment expenditures were crowded out.
iii.The supply of loanable funds curve shifted leftward.

Accepted Answer

A) ii only 
B) i, ii and iii 
C) i only 
D) i and ii 
E) ii and iii 
A) ii only 
B) i, ii and iii 
C) i only 
D) i and ii 
E) ii and iii

Question 19

The demand for loanable funds curve shows that the higher the real interest rate, the

Accepted Answer

A) more the loanable funds demand curve shifts leftward. 
B) smaller the quantity of loanable funds demanded. 
C) smaller the demand for loanable funds. 
D) larger the demand for loanable funds. 
E) larger the quantity of loanable funds demanded. 
A) more the loanable funds demand curve shifts leftward. 
B) smaller the quantity of loanable funds demanded. 
C) smaller the demand for loanable funds. 
D) larger the demand for loanable funds. 
E) larger the quantity of loanable funds demanded.

Question 20

During a recession, firms' expected profit from investment --------------------so the demand for loanable funds curve-------------------- .

Accepted Answer

A) falls; does not shift 
B) rises; shifts rightward 
C) falls; shifts leftward 
D) falls; shifts rightward 
E) rises; shifts leftward 
A) falls; does not shift 
B) rises; shifts rightward 
C) falls; shifts leftward 
D) falls; shifts rightward 
E) rises; shifts leftward

If the supply of loanable funds curve shifts rightward from the curve shown in the figure above, the shift could be the result of

A decrease in expected profit

If the real interest rate

Economists use the term wealth to mean

As the economy enters an expansion so that people's expected future incomes rise, there will be

A document that promises to pay specified sums of money on specified dates and is a debt to the Issuer is called

Other things remaining the same, the _{--------------------}_{--------------------}the real interest rate, the

Net investment equals

The figure above shows the loanable funds market. -At an interest rate of

The real interest rate is_{--------------------}related to the supply of loanable funds because_{--------------------}

If there is no Ricardo-Barro effect, a government budget surplus_{--------------------} the supply of loanable funds and_{--------------------} equilibrium investment.

The crowding-out effect is the tendency for

If expectations about future income change, there is

When_{--------------------}changes, the supply of loanable funds curve shifts.

Technological change can increase the demand for loanable funds because it

In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve. - If there is no ricardo-Barro effect and the government now runs a balanced budget, the

The demand for loanable funds curve shows that the higher the real interest rate, the

During a recession, firms' expected profit from investment _{--------------------}so the demand for loanable funds curve_{--------------------} .

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

GDP: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

The Monetary System

Money, Interest, and Inflation

Aggregate Supply Ad Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 10: Finance, Saving, and Investment

If the supply of loanable funds curve shifts rightward from the curve shown in the figure above, the shift could be the result of

A decrease in expected profit

If the real interest rate

Economists use the term wealth to mean

As the economy enters an expansion so that people's expected future incomes rise, there will be

A document that promises to pay specified sums of money on specified dates and is a debt to the Issuer is called

Other things remaining the same, the ----------------------------------------the real interest rate, the

Net investment equals

The figure above shows the loanable funds market. -At an interest rate of

The real interest rate is--------------------related to the supply of loanable funds because--------------------

If there is no Ricardo-Barro effect, a government budget surplus-------------------- the supply of loanable funds and-------------------- equilibrium investment.

The crowding-out effect is the tendency for

If expectations about future income change, there is

When--------------------changes, the supply of loanable funds curve shifts.

Technological change can increase the demand for loanable funds because it

In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve. - If there is no ricardo-Barro effect and the government now runs a balanced budget, the

The demand for loanable funds curve shows that the higher the real interest rate, the

During a recession, firms' expected profit from investment --------------------so the demand for loanable funds curve-------------------- .

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

GDP: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

The Monetary System

Money, Interest, and Inflation

Aggregate Supply Ad Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Other things remaining the same, the _{--------------------}_{--------------------}the real interest rate, the

The real interest rate is_{--------------------}related to the supply of loanable funds because_{--------------------}

If there is no Ricardo-Barro effect, a government budget surplus_{--------------------} the supply of loanable funds and_{--------------------} equilibrium investment.

When_{--------------------}changes, the supply of loanable funds curve shifts.

During a recession, firms' expected profit from investment _{--------------------}so the demand for loanable funds curve_{--------------------} .