Question 1

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) falls from $2,500 to $2,000. 
B) falls from $25,000 to $20,000. 
C) rises from $2,000 to $2,500. 
D) rises from $20,000 to $25,000. 
E) does not change. Bond prices are constant. 
A) falls from $2,500 to $2,000. 
B) falls from $25,000 to $20,000. 
C) rises from $2,000 to $2,500. 
D) rises from $20,000 to $25,000. 
E) does not change. Bond prices are constant.

Question 2

The government of Greece is running a large 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.

Accepted Answer

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

Question 3

Table 23.2.1
  
-Refer to Table 23.2.1. Government saving is

Accepted Answer

A) $15 million. 
B) -$5 million. 
C) $5 million. 
D) $45 million. 
E) $20 million. 
A) $15 million. 
B) -$5 million. 
C) $5 million. 
D) $45 million. 
E) $20 million.

Question 4

The tendency for a government budget deficit to decrease investment is called the

Accepted Answer

A) government dissaving effect. 
B) crowding-out effect. 
C) Ricardo-Barro effect. 
D) capital investment effect. 
E) deficit effect. 
A) government dissaving effect. 
B) crowding-out effect. 
C) Ricardo-Barro effect. 
D) capital investment effect. 
E) deficit effect.

Question 5

If the real interest rate is below the equilibrium real interest rate,

Accepted Answer

A) lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve shifts leftward. 
B) borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve shifts rightward. 
C) a shortage of of loanable funds exists, and the real interest rate rises. 
D) borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve shifts leftward. 
E) lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve shifts rightward. 
A) lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve shifts leftward. 
B) borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve shifts rightward. 
C) a shortage of of loanable funds exists, and the real interest rate rises. 
D) borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve shifts leftward. 
E) lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve shifts rightward.

Question 6

All of the following are sources of loanable funds EXCEPT

Accepted Answer

A) business investment. 
B) private saving. 
C) government budget surplus. 
D) international borrowing. 
E) none of the above 
A) business investment. 
B) private saving. 
C) government budget surplus. 
D) international borrowing. 
E) none of the above

Question 7

In Canada's economy, investment is financed by

Accepted Answer

A) C + I + G + X - M. 
B) C + S + T. 
C) S + T + M. 
D) S + (T - G)+ (X - M). 
E) S + (T - G)+ (M - X). 
A) C + I + G + X - M. 
B) C + S + T. 
C) S + T + M. 
D) S + (T - G)+ (X - M). 
E) S + (T - G)+ (M - X).

Question 8

The supply of loanable funds curve

Accepted Answer

A) has a positive slope. 
B) is vertical. 
C) is horizontal. 
D) has a negative slope. 
E) is upward sloping at low real interest rates and downward sloping at high real interest rates. 
A) has a positive slope. 
B) is vertical. 
C) is horizontal. 
D) has a negative slope. 
E) is upward sloping at low real interest rates and downward sloping at high real interest rates.

Question 9

An increase in ________ will shift the supply of loanable funds curve ________.

Accepted Answer

A) expected future income; rightward 
B) wealth; leftward 
C) disposable income; leftward 
D) default risk; rightward 
E) the real interest rate; rightward 
A) expected future income; rightward 
B) wealth; leftward 
C) disposable income; leftward 
D) default risk; rightward 
E) the real interest rate; rightward

Question 10

Table 23.3.7
The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule when the government's budget is balanced.
  
-Consider Table 23.3.7. If the government's budget becomes a deficit of $1.0 trillion, what is the quantity of private saving?

Accepted Answer

A) $8.0 trillion 
B) $7.5 trillion 
C) $8.5 trillion 
D) $7.0 trillion 
E) $6.5 trillion 
A) $8.0 trillion 
B) $7.5 trillion 
C) $8.5 trillion 
D) $7.0 trillion 
E) $6.5 trillion

Question 11

If the real interest rate rises from 3 percent to 5 percent,

Accepted Answer

A) the nominal interest rate falls. 
B) the demand for loanable funds curve shifts rightward. 
C) there is a movement up along the demand for loanable funds curve. 
D) the supply of loanable funds curve shifts rightward. 
E) there is a movement down along the supply of loanable funds curve. 
A) the nominal interest rate falls. 
B) the demand for loanable funds curve shifts rightward. 
C) there is a movement up along the demand for loanable funds curve. 
D) the supply of loanable funds curve shifts rightward. 
E) there is a movement down along the supply of loanable funds curve.

Question 12

Choose the statement that is incorrect.

Accepted Answer

A) A financial institution can be solvent but illiquid. 
B) A firm is illiquid if it has made long-term loans with borrowed funds and is faced with a sudden demand to repay more of what is has borrowed than its available cash. 
C) Insolvency and illiquidity were at the core of a global financial meltdown in 2007-2008. 
D) A financial institution's net worth is the market value of what it has lent minus the market value of what it has borrowed. 
E) If a financial institution's net worth is negative, the institution is solvent. 
A) A financial institution can be solvent but illiquid. 
B) A firm is illiquid if it has made long-term loans with borrowed funds and is faced with a sudden demand to repay more of what is has borrowed than its available cash. 
C) Insolvency and illiquidity were at the core of a global financial meltdown in 2007-2008. 
D) A financial institution's net worth is the market value of what it has lent minus the market value of what it has borrowed. 
E) If a financial institution's net worth is negative, the institution is solvent.

Question 13

As the ________ rises, the quantity of loanable funds supplied ________, other things remaining the same.

Accepted Answer

A) nominal interest rate; increases 
B) real interest rate; increases 
C) inflation rate; increases 
D) real interest rate; decreases 
E) inflation rate; decreases 
A) nominal interest rate; increases 
B) real interest rate; increases 
C) inflation rate; increases 
D) real interest rate; decreases 
E) inflation rate; decreases

Question 14

The greater a household's ________ the less is its saving.

Accepted Answer

A) return from saving 
B) wealth 
C) disposable income 
D) expected future profit 
E) all of the above 
A) return from saving 
B) wealth 
C) disposable income 
D) expected future profit 
E) all of the above

Question 15

Table 23.2.2
The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule.
   
73)Consider Table 23.2.2. What is the equilibrium real interest rate?
-Consider Table 23.2.2. If planned saving increases by $0.5 trillion at each real interest rate, what is the new equilibrium real interest rate?

Accepted Answer

A) 5.5 percent a year 
B) 5 percent a year 
C) 4.5 percent a year 
D) 6.0 percent a year 
E) There is no new equilibrium real interest rate. 
A) 5.5 percent a year 
B) 5 percent a year 
C) 4.5 percent a year 
D) 6.0 percent a year 
E) There is no new equilibrium real interest rate.

Question 16

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

Accepted Answer

A) $20,000. 
B) $0. 
C) $90,000. 
D) $100,000. 
E) $10,000. 
A) $20,000. 
B) $0. 
C) $90,000. 
D) $100,000. 
E) $10,000.

Question 17

The demand for loanable funds is the relationship between the quantity of loanable funds demanded and the ________, other things remaining the same.

Accepted Answer

A) real interest rate 
B) nominal interest rate 
C) inflation rate 
D) price level 
E) quantity of loanable funds supplied 
A) real interest rate 
B) nominal interest rate 
C) inflation rate 
D) price level 
E) quantity of loanable funds supplied

Question 18

According to the Ricardo-Barro effect, government deficits

Accepted Answer

A) lead to a rise in the equilibrium real interest rate, crowding out investment. 
B) lead to simultaneous increases in private saving and have no effect on the equilibrium real interest rate and investment. 
C) lead to simultaneous decreases in private saving and decreases in the equilibrium real interest rate and investment. 
D) lead to a fall in the equilibrium real interest rate and an increase in investment. 
E) raise the real interest rate but have no effect on the nominal interest rate. 
A) lead to a rise in the equilibrium real interest rate, crowding out investment. 
B) lead to simultaneous increases in private saving and have no effect on the equilibrium real interest rate and investment. 
C) lead to simultaneous decreases in private saving and decreases in the equilibrium real interest rate and investment. 
D) lead to a fall in the equilibrium real interest rate and an increase in investment. 
E) raise the real interest rate but have no effect on the nominal interest rate.

Question 19

In the market for loanable funds, as the real interest rate rises, the ________ and the ________.

Accepted Answer

A) quantity of loanable funds supplied increases; quantity of loanable funds demanded decreases 
B) quantity of loanable funds supplied decreases; quantity of loanable funds demanded increases 
C) supply of loanable funds increases; demand for loanable funds decreases 
D) supply of loanable funds decreases; demand for loanable funds increases 
E) quantity of loanable funds supplied increases; supply of loanable funds increases 
A) quantity of loanable funds supplied increases; quantity of loanable funds demanded decreases 
B) quantity of loanable funds supplied decreases; quantity of loanable funds demanded increases 
C) supply of loanable funds increases; demand for loanable funds decreases 
D) supply of loanable funds decreases; demand for loanable funds increases 
E) quantity of loanable funds supplied increases; supply of loanable funds increases

Question 20

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 goods and services. You pay no taxes. Your wealth at the end of the year is

Accepted Answer

A) $20,000. 
B) $0. 
C) $90,000. 
D) $100,000. 
E) $10,000. 
A) $20,000. 
B) $0. 
C) $90,000. 
D) $100,000. 
E) $10,000.

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

The government of Greece is running a large 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.

Table 23.2.1 -Refer to Table 23.2.1. Government saving is

The tendency for a government budget deficit to decrease investment is called the

If the real interest rate is below the equilibrium real interest rate,

All of the following are sources of loanable funds EXCEPT

In Canada's economy, investment is financed by

The supply of loanable funds curve

An increase in will shift the supply of loanable funds curve .

Table 23.3.7 The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule when the government's budget is balanced. -Consider Table 23.3.7. If the government's budget becomes a deficit of $1.0 trillion, what is the quantity of private saving?

If the real interest rate rises from 3 percent to 5 percent,

Choose the statement that is incorrect.

As the rises, the quantity of loanable funds supplied , other things remaining the same.

The greater a household's ________ the less is its saving.

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

The demand for loanable funds is the relationship between the quantity of loanable funds demanded and the ________, other things remaining the same.

According to the Ricardo-Barro effect, government deficits

In the market for loanable funds, as the real interest rate rises, the and the .

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 goods and services. You pay no taxes. Your wealth at the end of the year is

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 Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 23: Finance, Saving, and Investment

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

The government of Greece is running a large 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.

Table 23.2.1 -Refer to Table 23.2.1. Government saving is

The tendency for a government budget deficit to decrease investment is called the

If the real interest rate is below the equilibrium real interest rate,

All of the following are sources of loanable funds EXCEPT

In Canada's economy, investment is financed by

The supply of loanable funds curve

An increase in ________ will shift the supply of loanable funds curve ________.

Table 23.3.7 The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule when the government's budget is balanced. -Consider Table 23.3.7. If the government's budget becomes a deficit of $1.0 trillion, what is the quantity of private saving?

If the real interest rate rises from 3 percent to 5 percent,

Choose the statement that is incorrect.

As the ________ rises, the quantity of loanable funds supplied ________, other things remaining the same.

The greater a household's ________ the less is its saving.

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

The demand for loanable funds is the relationship between the quantity of loanable funds demanded and the ________, other things remaining the same.

According to the Ricardo-Barro effect, government deficits

In the market for loanable funds, as the real interest rate rises, the ________ and the ________.

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 goods and services. You pay no taxes. Your wealth at the end of the year is

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 Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

An increase in will shift the supply of loanable funds curve .

As the rises, the quantity of loanable funds supplied , other things remaining the same.

In the market for loanable funds, as the real interest rate rises, the and the .