Question 1

As the real interest rate rises, the quantity of loanable funds supplied ________ and the quantity of loanable funds demanded ________.

Accepted Answer

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

Question 2

If expectations about future disposable income change, there is

Accepted Answer

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

Question 3

If an economy's depreciation is greater than its gross investment, then

Accepted Answer

A)  net investment is positive and saving is negative. 
B)  the economy's capital stock decreases. 
C)  net investment is positive and saving is positive. 
D)  net investment is negative and saving is negative. 
E)  net investment must equal saving. 
A)  net investment is positive and saving is negative. 
B)  the economy's capital stock decreases. 
C)  net investment is positive and saving is positive. 
D)  net investment is negative and saving is negative. 
E)  net investment must equal saving. B

Question 4

According to the Ricardo-Barro effect, if the government runs a budget deficit of $100 billion, by how much does the amount of equilibrium investment increase or decrease?

Accepted Answer

Equilibrium investment does not increase

Question 5

China's government runs a budget surplus.As a result,

Accepted Answer

A)  if there is no Ricardo-Barro effect, the supply of loanable funds curve lies to the right of the private supply of loanable funds curve. 
B)  interest rates should increase. 
C)  the Ricardo-Barro effect predicts that the real interest rate will increase. 
D)  the quantity of loanable funds decreases. 
E)  saving will exceed investment. 
A)  if there is no Ricardo-Barro effect, the supply of loanable funds curve lies to the right of the private supply of loanable funds curve. 
B)  interest rates should increase. 
C)  the Ricardo-Barro effect predicts that the real interest rate will increase. 
D)  the quantity of loanable funds decreases. 
E)  saving will exceed investment.

Question 6

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

Accepted Answer

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

Question 7

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

Question 8

What is the difference, if any, between physical capital and financial capital?

Accepted Answer

Physical capital refers to the actual to

Question 9

With no Ricardo-Barro effect, a government budget surplus

Accepted Answer

A)  increases the supply of loanable funds. 
B)  increases the demand for loanable funds. 
C)  decreases the supply of loanable funds. 
D)  decreases the demand for loanable funds. 
E)  has no effect on either the supply or the demand for loanable funds. 
A)  increases the supply of loanable funds. 
B)  increases the demand for loanable funds. 
C)  decreases the supply of loanable funds. 
D)  decreases the demand for loanable funds. 
E)  has no effect on either the supply or the demand for loanable funds.

Question 10

If the real interest rate

Accepted Answer

A)  rises, the supply of loanable funds curve shifts rightward. 
B)  rises, 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)  falls, the supply of loanable funds curve shifts leftward. 
A)  rises, the supply of loanable funds curve shifts rightward. 
B)  rises, 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)  falls, the supply of loanable funds curve shifts leftward.

Question 11

In the late 1990s, the U.S.federal government had a budget surplus.If there is no Ricardo-Barro effect, the budget surplus ________ the real interest rate and ________ the equilibrium quantity of investment.

Accepted Answer

A)  raised; increased 
B)  raised; decreased 
C)  lowered; increased 
D)  lowered; decreased 
E)  did not change; did not change 
A)  raised; increased 
B)  raised; decreased 
C)  lowered; increased 
D)  lowered; decreased 
E)  did not change; did not change

Question 12

The crowding-out effect implies that a government budget deficit ________ the demand for loanable funds and ________ equilibrium investment.

Accepted Answer

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

Question 13

Wealth is

Accepted Answer

A)  defined as the money in your savings account. 
B)  another name for income. 
C)  the value of all the things that a person owns. 
D)  equivalent to saving. 
E)  the same as investment in financial capital. 
A)  defined as the money in your savings account. 
B)  another name for income. 
C)  the value of all the things that a person owns. 
D)  equivalent to saving. 
E)  the same as investment in financial capital.

Question 14

U.S.capital at the end of 2010 equals U.S.capital at the beginning of 2010 plus

Accepted Answer

A)  nothing, because capital can't change in just one year. 
B)  gross investment during 2010. 
C)  gross investment during 2010 minus net investment in 2010. 
D)  net investment during 2010. 
E)  depreciation during 2010 minus gross investment during 2010. 
A)  nothing, because capital can't change in just one year. 
B)  gross investment during 2010. 
C)  gross investment during 2010 minus net investment in 2010. 
D)  net investment during 2010. 
E)  depreciation during 2010 minus gross investment during 2010.

Question 15

According to the crowding-out effect, if the government runs a budget deficit of $100 billion, what is the change in the equilibrium quantity of investment?

Accepted Answer

Investment decreases.The government budg

Question 16

________ increases the quantity of capital and ________ decreases the quantity of capital.

Accepted Answer

A)  net investment; gross investment 
B)  investment; depreciation 
C)  depreciation; net investment 
D)  investment; saving 
E)  gross investment; net investment 
A)  net investment; gross investment 
B)  investment; depreciation 
C)  depreciation; net investment 
D)  investment; saving 
E)  gross investment; net investment

Question 17

If there is no Ricardo-Barro effect, an increase in the government budget deficit

Accepted Answer

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

Question 18

If there is no Ricardo-Barro effect, when the government runs a budget surplus, it

Accepted Answer

A)  competes with businesses for private saving. 
B)  shifts the supply of loanable funds curve leftward. 
C)  shifts the demand for loanable funds curve leftward. 
D)  contributes to financing investment. 
E)  shifts the demand for loanable funds curve rightward. 
A)  competes with businesses for private saving. 
B)  shifts the supply of loanable funds curve leftward. 
C)  shifts the demand for loanable funds curve leftward. 
D)  contributes to financing investment. 
E)  shifts the demand for loanable funds curve rightward.

Question 19

The demand for loanable funds increases if

Accepted Answer

A)  technological growth slows. 
B)  population growth slows. 
C)  expected profit increases. 
D)  firms fear a recession. 
E)  wealth increases. 
A)  technological growth slows. 
B)  population growth slows. 
C)  expected profit increases. 
D)  firms fear a recession. 
E)  wealth increases.

Question 20

Which of the following occurs if the real interest rate falls?

Accepted Answer

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

As the real interest rate rises, the quantity of loanable funds supplied and the quantity of loanable funds demanded .

If expectations about future disposable income change, there is

If an economy's depreciation is greater than its gross investment, then

According to the Ricardo-Barro effect, if the government runs a budget deficit of $100 billion, by how much does the amount of equilibrium investment increase or decrease?

China's government runs a budget surplus.As a result,

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

What is the difference, if any, between physical capital and financial capital?

With no Ricardo-Barro effect, a government budget surplus

If the real interest rate

In the late 1990s, the U.S.federal government had a budget surplus.If there is no Ricardo-Barro effect, the budget surplus the real interest rate and the equilibrium quantity of investment.

The crowding-out effect implies that a government budget deficit the demand for loanable funds and equilibrium investment.

Wealth is

U.S.capital at the end of 2010 equals U.S.capital at the beginning of 2010 plus

According to the crowding-out effect, if the government runs a budget deficit of $100 billion, what is the change in the equilibrium quantity of investment?

increases the quantity of capital and decreases the quantity of capital.

If there is no Ricardo-Barro effect, an increase in the government budget deficit

If there is no Ricardo-Barro effect, when the government runs a budget surplus, it

The demand for loanable funds increases if

Which of the following occurs if the real interest rate falls?

Getting Started

The Usand 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 and 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

As the real interest rate rises, the quantity of loanable funds supplied ________ and the quantity of loanable funds demanded ________.

If expectations about future disposable income change, there is

If an economy's depreciation is greater than its gross investment, then

According to the Ricardo-Barro effect, if the government runs a budget deficit of $100 billion, by how much does the amount of equilibrium investment increase or decrease?

China's government runs a budget surplus.As a result,

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

What is the difference, if any, between physical capital and financial capital?

With no Ricardo-Barro effect, a government budget surplus

If the real interest rate

In the late 1990s, the U.S.federal government had a budget surplus.If there is no Ricardo-Barro effect, the budget surplus ________ the real interest rate and ________ the equilibrium quantity of investment.

The crowding-out effect implies that a government budget deficit ________ the demand for loanable funds and ________ equilibrium investment.

Wealth is

U.S.capital at the end of 2010 equals U.S.capital at the beginning of 2010 plus

According to the crowding-out effect, if the government runs a budget deficit of $100 billion, what is the change in the equilibrium quantity of investment?

________ increases the quantity of capital and ________ decreases the quantity of capital.

If there is no Ricardo-Barro effect, an increase in the government budget deficit

If there is no Ricardo-Barro effect, when the government runs a budget surplus, it

The demand for loanable funds increases if

Which of the following occurs if the real interest rate falls?

Getting Started

The Usand 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 and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

As the real interest rate rises, the quantity of loanable funds supplied and the quantity of loanable funds demanded .

In the late 1990s, the U.S.federal government had a budget surplus.If there is no Ricardo-Barro effect, the budget surplus the real interest rate and the equilibrium quantity of investment.

The crowding-out effect implies that a government budget deficit the demand for loanable funds and equilibrium investment.

increases the quantity of capital and decreases the quantity of capital.