Question 1

Gross investment equals

Accepted Answer

A) net investment financial investment. 
B) gross financial capital minus depreciation. 
C) net investment plus depreciation. 
D) net investment minus depreciation. 
E) gross financial capital plus depreciation. 
A) net investment financial investment. 
B) gross financial capital minus depreciation. 
C) net investment plus depreciation. 
D) net investment minus depreciation. 
E) gross financial capital plus depreciation.

Question 2

In the figure above, the leftward shift from the demand for loanable funds curve DLF1 to the demand for loanable funds curve DLF3, could be the result of

Accepted Answer

A) a fall in the interest rate. 
B) an advancement in technology. 
C) a decrease in expected profit. 
D) an increase in the population. 
E) a rise in the interest rate. 
A) a fall in the interest rate. 
B) an advancement in technology. 
C) a decrease in expected profit. 
D) an increase in the population. 
E) a rise in the interest rate.

Question 3

What happens to the demand for loanable funds curve when the economy enters a recession?

Accepted Answer

A) The demand for loanable funds curve shifts leftward because the real interest rate falls. 
B) The demand for loanable funds curve shifts leftward because wealth decreases. 
C) The demand for loanable funds curve shifts rightward because the real interest rate falls. 
D) The demand for loanable funds curve shifts rightward because expected profit falls. 
E) The demand for loanable funds curve shifts leftward because expected profit falls. 
A) The demand for loanable funds curve shifts leftward because the real interest rate falls. 
B) The demand for loanable funds curve shifts leftward because wealth decreases. 
C) The demand for loanable funds curve shifts rightward because the real interest rate falls. 
D) The demand for loanable funds curve shifts rightward because expected profit falls. 
E) The demand for loanable funds curve shifts leftward because expected profit falls.

Question 4

$\begin{array}{lllll}
&\text { Investment } & \text { Private saving } & \text { Net taxes }& \text { Government expenditures }\
\text { Real interest rate } & \text { (billions of } & \text { (billions of } & \text { (billions of } & \text { (billions of } \
\text { (percent per year) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) }\
\hline 3 & 60 & 20 & 40 & 20 \
4 & 50 & 30 & 40 & 20 \
5 & 40 & 40 & 40 & 20 \
6 & 30 & 50 & 40 & 20 \
7 & 20 & 60 & 40 & 20 \
\hline
\end{array}$
The table above gives a nation's investment demand and saving supply schedules. It also has the government's net taxes and expenditures.
- The loanable funds market is in equilibrium when the real interest rate is

Accepted Answer

A) 4 percent. 
B) 7 percent 
C) 3 percent 
D) 5 percent. 
E) 6 percent. 
A) 4 percent. 
B) 7 percent 
C) 3 percent 
D) 5 percent. 
E) 6 percent.

Question 5

Suppose that the initial supply of loanable funds curve is SLF1. In the figure above, an increase in the real interest rate leads to
I. a shift in the supply of loanable funds curve from SLF1 to SLF2.
Ii. a shift in the supply of loanable funds curve from SLF1 to SLF3.
 iii. a movement along the supply of loanable funds curve SLF1.
Iv. no change whatever.

Accepted Answer

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

Question 6

Which of the following is correct?

Accepted Answer

A) The change in the nation's capital stock over a year equals the amount of gross investment. 
B) Net investment is the same as capital consumption. 
C) Gross investment equals net investment minus depreciation. 
D) Gross investment is the total spent on capital. 
E) Net investment is the total spent on capital. 
A) The change in the nation's capital stock over a year equals the amount of gross investment. 
B) Net investment is the same as capital consumption. 
C) Gross investment equals net investment minus depreciation. 
D) Gross investment is the total spent on capital. 
E) Net investment is the total spent on capital.

Question 7

If the real interest rate rises, then the

Accepted Answer

A) supply of saving increases and the supply of loanable funds curve shifts rightward. 
B) supply of saving decreases and the supply of loanable funds curve shifts leftward. 
C) quantity of saving decreases and there is a movement down along the supply of loanable funds curve. 
D) demand for investment decreases and the demand for loanable funds curve shifts leftward. 
E) quantity of saving increases and there is a movement up along the supply of loanable funds curve. 
A) supply of saving increases and the supply of loanable funds curve shifts rightward. 
B) supply of saving decreases and the supply of loanable funds curve shifts leftward. 
C) quantity of saving decreases and there is a movement down along the supply of loanable funds curve. 
D) demand for investment decreases and the demand for loanable funds curve shifts leftward. 
E) quantity of saving increases and there is a movement up along the supply of loanable funds curve.

Question 8

An example of financial capital is

Accepted Answer

A) computers. 
B) bonds. 
C) machines. 
D) the talents of a highly paid movie star. 
E) buildings. 
A) computers. 
B) bonds. 
C) machines. 
D) the talents of a highly paid movie star. 
E) buildings.

Question 9

The figure above shows the loanable funds market.
- If the real interest rate is 10 percent, then

Accepted Answer

A) the government must intervene in order to prevent a credit crisis. 
B) savers will exit the market because of the high opportunity cost of saving. 
C) there is a surplus in the loanable funds market. 
D) there is a shortage in the loanable funds market. 
E) the interest rate must increase. 
A) the government must intervene in order to prevent a credit crisis. 
B) savers will exit the market because of the high opportunity cost of saving. 
C) there is a surplus in the loanable funds market. 
D) there is a shortage in the loanable funds market. 
E) the interest rate must increase.

Question 10

The quantity of loanable funds supplied increases if the real interest rate rises, all other things remaining the same, because the

Accepted Answer

A) cost of living is determined by the real interest rate. 
B) real interest rate is the opportunity cost of consumption. 
C) demand for investment increases when the real interest rate rises. 
D) real interest rate is the opportunity cost of saving. 
E) real interest rate is inversely related to the cost of buying on credit. 
A) cost of living is determined by the real interest rate. 
B) real interest rate is the opportunity cost of consumption. 
C) demand for investment increases when the real interest rate rises. 
D) real interest rate is the opportunity cost of saving. 
E) real interest rate is inversely related to the cost of buying on credit.

Question 11

When the real interest rate --------------------the equilibrium real interest rate, there is a --------------------of loanable funds and the real interest rate-------------------- .

Accepted Answer

A) is less than; surplus; rises 
B) exceeds; surplus ; falls 
C) exceeds; shortage; rises 
D) exceeds; surplus; rises 
E) is less than; shortage; falls 
A) is less than; surplus; rises 
B) exceeds; surplus ; falls 
C) exceeds; shortage; rises 
D) exceeds; surplus; rises 
E) is less than; shortage; falls

Question 12

The local Allied Moving Company begins this year with capital equal to $250,000. During the year the firm depreciates $150,000 worth of its capital and ends the year with capital equal to $250,000. Which statement correctly summarizes Allied Moving Company's investment?

Accepted Answer

A) Allied Moving Company made no capital investment during the year. 
B) Allied Moving Company made net investment of $150,000 during the year. 
C) Allied Moving Company made no gross investment during the year. 
D) Allied Moving Company made gross investment of $250,000 during the year. 
E) Allied Moving Company made no net investment during the year. 
A) Allied Moving Company made no capital investment during the year. 
B) Allied Moving Company made net investment of $150,000 during the year. 
C) Allied Moving Company made no gross investment during the year. 
D) Allied Moving Company made gross investment of $250,000 during the year. 
E) Allied Moving Company made no net investment during the year.

Question 13

Suppose that there is an increase in disposable income and simultaneously an increase in the expected profitability of investment. As a result, the equilibrium real interest rate --------------------and the
Equilibrium quantity of loanable funds---------------------------------------- .

Accepted Answer

A) might rise, fall, or remain unchanged; increases 
B) might rise, fall, or remain unchanged; decreases 
C) rises; increases 
D) remains unchanged; increases 
E) falls; increases 
A) might rise, fall, or remain unchanged; increases 
B) might rise, fall, or remain unchanged; decreases 
C) rises; increases 
D) remains unchanged; increases 
E) falls; increases

Question 14

Which of the following decreases the demand for loanable funds and shifts the demand for loanable funds curve leftward?

Accepted Answer

A) wealth decreases 
B) technology that increases productivity is introduced 
C) the economy experiences a recession 
D) the real interest rate rises 
E) an economy experiences a rapid increase in population 
A) wealth decreases 
B) technology that increases productivity is introduced 
C) the economy experiences a recession 
D) the real interest rate rises 
E) an economy experiences a rapid increase in population

Question 15

Bill's Lawn service starts the year with 20 lawn mowers. During the year, 3 mowers break and are not worth fixing. Bill also expands his business and buys 10 more mowers. Bill's net investment is
--------------------Mowers.

Accepted Answer

A) 10 
B) 20 
C) 27 
D) 7 
E) 13 
A) 10 
B) 20 
C) 27 
D) 7 
E) 13

Question 16

A decrease in wealth leads to a

Accepted Answer

A) rightward shift of the supply of loanable funds curve. 
B) downward movement along the supply of loanable funds curve. 
C) leftward shift of the supply of loanable funds curve. 
D) leftward shift of the demand for loanable funds curve. 
E) rightward shift of the demand for loanable funds curve. 
A) rightward shift of the supply of loanable funds curve. 
B) downward movement along the supply of loanable funds curve. 
C) leftward shift of the supply of loanable funds curve. 
D) leftward shift of the demand for loanable funds curve. 
E) rightward shift of the demand for loanable funds curve.

Question 17

The difference between the amount of capital at the beginning of a year and the amount of capital at the end of the year is equal to

Accepted Answer

A) gross investment. 
B) depreciation. 
C) net investment. 
D) financial consumption. 
E) capital consumption. 
A) gross investment. 
B) depreciation. 
C) net investment. 
D) financial consumption. 
E) capital consumption.

Question 18

Wealth is to --------------------as capital stock is to  --------------------

Accepted Answer

A) saving; investment 
B) investment; saving 
C) income; earnings 
D) saving; depreciation 
E) income; net investment 
A) saving; investment 
B) investment; saving 
C) income; earnings 
D) saving; depreciation 
E) income; net investment

Question 19

A bond's price is $80 and the bond pays $8 in interest every year. The bond's interest rate is --------------------.

Accepted Answer

A) 80 percent 
B) 8 percent 
C) 10 percent 
D) 4 percent 
E) None of the above are correct. 
A) 80 percent 
B) 8 percent 
C) 10 percent 
D) 4 percent 
E) None of the above are correct.

Question 20

Government saving is equal to

Accepted Answer

A) private savings minus government expenditures. 
B) net taxes plus government expenditures. 
C) net taxes minus government expenditures. 
D) the quantity of investment demanded. 
E) net taxes. 
A) private savings minus government expenditures. 
B) net taxes plus government expenditures. 
C) net taxes minus government expenditures. 
D) the quantity of investment demanded. 
E) net taxes.

Gross investment equals

In the figure above, the leftward shift from the demand for loanable funds curve DLF1 to the demand for loanable funds curve DLF3, could be the result of

What happens to the demand for loanable funds curve when the economy enters a recession?

Which of the following is correct?

If the real interest rate rises, then the

An example of financial capital is

The figure above shows the loanable funds market. - If the real interest rate is 10 percent, then

The quantity of loanable funds supplied increases if the real interest rate rises, all other things remaining the same, because the

When the real interest rate _{--------------------}the equilibrium real interest rate, there is a _{--------------------}of loanable funds and the real interest rate_{--------------------} .

The local Allied Moving Company begins this year with capital equal to $250,000. During the year the firm depreciates $150,000 worth of its capital and ends the year with capital equal to $250,000. Which statement correctly summarizes Allied Moving Company's investment?

Suppose that there is an increase in disposable income and simultaneously an increase in the expected profitability of investment. As a result, the equilibrium real interest rate _{--------------------}and the Equilibrium quantity of loanable funds_{--------------------}_{--------------------} .

Which of the following decreases the demand for loanable funds and shifts the demand for loanable funds curve leftward?

Bill's Lawn service starts the year with 20 lawn mowers. During the year, 3 mowers break and are not worth fixing. Bill also expands his business and buys 10 more mowers. Bill's net investment is _{--------------------}Mowers.

A decrease in wealth leads to a

The difference between the amount of capital at the beginning of a year and the amount of capital at the end of the year is equal to

Wealth is to _{--------------------}as capital stock is to _{--------------------}

A bond's price is $80 and the bond pays $8 in interest every year. The bond's interest rate is _{--------------------}.

Government saving is equal to

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

Gross investment equals

In the figure above, the leftward shift from the demand for loanable funds curve DLF1 to the demand for loanable funds curve DLF3, could be the result of

What happens to the demand for loanable funds curve when the economy enters a recession?

Which of the following is correct?

If the real interest rate rises, then the

An example of financial capital is

The figure above shows the loanable funds market. - If the real interest rate is 10 percent, then

The quantity of loanable funds supplied increases if the real interest rate rises, all other things remaining the same, because the

When the real interest rate --------------------the equilibrium real interest rate, there is a --------------------of loanable funds and the real interest rate-------------------- .

The local Allied Moving Company begins this year with capital equal to $250,000. During the year the firm depreciates $150,000 worth of its capital and ends the year with capital equal to $250,000. Which statement correctly summarizes Allied Moving Company's investment?

Suppose that there is an increase in disposable income and simultaneously an increase in the expected profitability of investment. As a result, the equilibrium real interest rate --------------------and the Equilibrium quantity of loanable funds---------------------------------------- .

Which of the following decreases the demand for loanable funds and shifts the demand for loanable funds curve leftward?

Bill's Lawn service starts the year with 20 lawn mowers. During the year, 3 mowers break and are not worth fixing. Bill also expands his business and buys 10 more mowers. Bill's net investment is --------------------Mowers.

A decrease in wealth leads to a

The difference between the amount of capital at the beginning of a year and the amount of capital at the end of the year is equal to

Wealth is to --------------------as capital stock is to --------------------

A bond's price is $80 and the bond pays $8 in interest every year. The bond's interest rate is --------------------.

Government saving is equal to

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

When the real interest rate _{--------------------}the equilibrium real interest rate, there is a _{--------------------}of loanable funds and the real interest rate_{--------------------} .

Suppose that there is an increase in disposable income and simultaneously an increase in the expected profitability of investment. As a result, the equilibrium real interest rate _{--------------------}and the Equilibrium quantity of loanable funds_{--------------------}_{--------------------} .

Bill's Lawn service starts the year with 20 lawn mowers. During the year, 3 mowers break and are not worth fixing. Bill also expands his business and buys 10 more mowers. Bill's net investment is _{--------------------}Mowers.

Wealth is to _{--------------------}as capital stock is to _{--------------------}

A bond's price is $80 and the bond pays $8 in interest every year. The bond's interest rate is _{--------------------}.