Question 1

If there is no Ricardo-Barro effect, a government budget surplus ________ the total supply of loanable funds and ________ the real interest rate.

Accepted Answer

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

Question 2

Which of the following are typically financed in a "stock market"?
i. shares sold by a firm to finance its international growth plans.
ii. new mortgages for home buyers
iii. credit card balances

Accepted Answer

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

Question 3

An increase in the real interest rate

Accepted Answer

A)  has no effect on the loanable funds. 
B)  increases the quantity of loanable funds supplied. 
C)  increases current consumption. 
D)  decreases the quantity of loanable funds supplied. 
E)  shifts the supply of loanable funds curve rightward. 
A)  has no effect on the loanable funds. 
B)  increases the quantity of loanable funds supplied. 
C)  increases current consumption. 
D)  decreases the quantity of loanable funds supplied. 
E)  shifts the supply of loanable funds curve rightward.

Question 4

When a student uses a credit card to buy an iPod, the student is

Accepted Answer

A)  borrowing in the bond market. 
B)  lending in the bond market. 
C)  lending in the loan market. 
D)  borrowing in the loan market. 
E)  lending in the stock market. 
A)  borrowing in the bond market. 
B)  lending in the bond market. 
C)  lending in the loan market. 
D)  borrowing in the loan market. 
E)  lending in the stock market.

Question 5

How do each of the following shift the supply of loanable funds and the demand for loanable funds curves?
 What is the effect of each on the equilibrium real interest rate and equilibrium quantity of loanable funds?
a. Households' disposable incomes increase
b. An increase in expected profit

Accepted Answer

a. Saving increases and the supply of lo

Question 6

An increase in the quantity of loanable funds demanded occurs when

Accepted Answer

A)  the real interest rate falls. 
B)  the real interest rate rises. 
C)  the supply of loanable funds decreases. 
D)  the expected profit rises. 
E)  wealth decreases. 
A)  the real interest rate falls. 
B)  the real interest rate rises. 
C)  the supply of loanable funds decreases. 
D)  the expected profit rises. 
E)  wealth decreases.

Question 7

-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.The equilibrium interest rate is ________ percent and the equilibrium quantity of loanable funds is ________.

Accepted Answer

A)  6; $1.6 trillion 
B)  6; $2.0 trillion 
C)  4; $1.4 trillion 
D)  4; $1.8 trillion 
E)  4; $2.0 trillion 
A)  6; $1.6 trillion 
B)  6; $2.0 trillion 
C)  4; $1.4 trillion 
D)  4; $1.8 trillion 
E)  4; $2.0 trillion

Question 8

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

Question 9

In 2010, the U.S.federal government had a budget deficit.If there is no Ricardo-Barro effect, the budget deficit ________ 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 10

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

Accepted Answer

A)  8 percent there is a surplus of loanable funds. 
B)  8 percent the quantity demanded of loanable funds exceeds the quantity supplied. 
C)  4 percent the quantity supplied of loanable funds equals $18 trillion. 
D)  6 percent the quantity demanded of loanable funds equals $14 trillion. 
E)  4 percent there is a surplus of loanable funds. 
A)  8 percent there is a surplus of loanable funds. 
B)  8 percent the quantity demanded of loanable funds exceeds the quantity supplied. 
C)  4 percent the quantity supplied of loanable funds equals $18 trillion. 
D)  6 percent the quantity demanded of loanable funds equals $14 trillion. 
E)  4 percent there is a surplus of loanable funds.

Question 11

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

Accepted Answer

A)  determines the cost of living. 
B)  is the opportunity cost of investment. 
C)  affects the quantity of saving supplied. 
D)  is not related to the price of bonds and stocks. 
E)  affects the supply of saving which, in turn, determines the quantity of investment. 
A)  determines the cost of living. 
B)  is the opportunity cost of investment. 
C)  affects the quantity of saving supplied. 
D)  is not related to the price of bonds and stocks. 
E)  affects the supply of saving which, in turn, determines the quantity of investment.

Question 12

Which of the following shifts the supply of loanable funds curve?

Accepted Answer

A)  change in the real interest rate 
B)  change in investment demand 
C)  change in disposable income 
D)  change in expected profit 
E)  change in "animal spirits" 
A)  change in the real interest rate 
B)  change in investment demand 
C)  change in disposable income 
D)  change in expected profit 
E)  change in "animal spirits"

Question 13

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

Question 14

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

Accepted Answer

An increase in expected profit

Question 15

The demand for loanable funds curve shifts in response to changes in

Accepted Answer

A)  the real interest rate. 
B)  the amount of household savings. 
C)  expected profits. 
D)  the expected future disposable income. 
E)  wealth. 
A)  the real interest rate. 
B)  the amount of household savings. 
C)  expected profits. 
D)  the expected future disposable income. 
E)  wealth.

Question 16

As the economy enters a strong expansion, then firms' demand for loanable funds

Accepted Answer

A)  increases because profit expectations will increase. 
B)  decreases due to lower profit expectations. 
C)  increases due to increases in the nominal interest rate. 
D)  decreases due to decreases in the nominal interest rate. 
E)  increases due to increases in the real interest rate. 
A)  increases because profit expectations will increase. 
B)  decreases due to lower profit expectations. 
C)  increases due to increases in the nominal interest rate. 
D)  decreases due to decreases in the nominal interest rate. 
E)  increases due to increases in the real interest rate.

Question 17

$$\begin{array} { c c c c c } 
\begin{array} { l } 
\text { Real interest rate } \
\text { (percent per year) }
\end{array} & \begin{array} { c } 
\text { Investment } \
\text { (billions of }
\end{array} & \begin{array} { c } 
\text { Private saving } \
\text { (billions of }
\end{array} & \begin{array} { c } 
\text { Net taxes } \
\text { (billions of }
\end{array} & \begin{array} { c } 
\text { Government expenditures } \
\text { (billions of }
\end{array} \
\text { 2005 dollars) } & \text { 2005 dollars) } & \text { 2005 dollars) } \
\hline 3 & 60 & 20 & 40 & 20 \
4 & 50 & 30 & 40 & 20 \
5 & 40 & 40 & 40 & 20 \
6 & 30 & 50 & 40 & 20 \
7 & 20 & 60 & 40 & 20
\end{array}$$
-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)  5 percent. 
C)  6 percent. 
D)  7 percent 
E)  3 percent 
A)  4 percent. 
B)  5 percent. 
C)  6 percent. 
D)  7 percent 
E)  3 percent

Question 18

If there is no Ricardo-Barro effect, a government budget surplus ________ the supply of 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 19

Net investment is

Accepted Answer

A)  the same as gross investment. 
B)  the same as depreciation. 
C)  gross investment minus depreciation. 
D)  gross investment plus depreciation. 
E)  the same as wealth. 
A)  the same as gross investment. 
B)  the same as depreciation. 
C)  gross investment minus depreciation. 
D)  gross investment plus depreciation. 
E)  the same as wealth.

Question 20

At the beginning of the year, AAA-1 Towing owns trucks and buildings for a total value of $1 million.During the year, it invests $250,000 to replace towing trucks worth $230,000 destroyed in a flood and to cover $50,000 worth of depreciation.AAA-1 Towing's capital stock at the end of the year was

Accepted Answer

A)  $970,000. 
B)  $1,250,000. 
C)  $950,000. 
D)  $1,280,000. 
E)  $1,020,000. 
A)  $970,000. 
B)  $1,250,000. 
C)  $950,000. 
D)  $1,280,000. 
E)  $1,020,000.

If there is no Ricardo-Barro effect, a government budget surplus the total supply of loanable funds and the real interest rate.

Which of the following are typically financed in a "stock market"? i. shares sold by a firm to finance its international growth plans. ii. new mortgages for home buyers iii. credit card balances

An increase in the real interest rate

When a student uses a credit card to buy an iPod, the student is

How do each of the following shift the supply of loanable funds and the demand for loanable funds curves? What is the effect of each on the equilibrium real interest rate and equilibrium quantity of loanable funds? a. Households' disposable incomes increase b. An increase in expected profit

An increase in the quantity of loanable funds demanded occurs when

-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.The equilibrium interest rate is percent and the equilibrium quantity of loanable funds is .

If the real interest rate rises, then the

In 2010, the U.S.federal government had a budget deficit.If there is no Ricardo-Barro effect, the budget deficit the real interest rate and the equilibrium quantity of investment.

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

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

Which of the following shifts the supply of loanable funds curve?

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

The demand for loanable funds curve shifts in response to changes in

As the economy enters a strong expansion, then firms' demand for loanable funds

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

Net investment is

At the beginning of the year, AAA-1 Towing owns trucks and buildings for a total value of $1 million.During the year, it invests $250,000 to replace towing trucks worth $230,000 destroyed in a flood and to cover $50,000 worth of depreciation.AAA-1 Towing's capital stock at the end of the year was

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

If there is no Ricardo-Barro effect, a government budget surplus ________ the total supply of loanable funds and ________ the real interest rate.

Which of the following are typically financed in a "stock market"? i. shares sold by a firm to finance its international growth plans. ii. new mortgages for home buyers iii. credit card balances

An increase in the real interest rate

When a student uses a credit card to buy an iPod, the student is

How do each of the following shift the supply of loanable funds and the demand for loanable funds curves? What is the effect of each on the equilibrium real interest rate and equilibrium quantity of loanable funds? a. Households' disposable incomes increase b. An increase in expected profit

An increase in the quantity of loanable funds demanded occurs when

-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.The equilibrium interest rate is ________ percent and the equilibrium quantity of loanable funds is ________.

If the real interest rate rises, then the

In 2010, the U.S.federal government had a budget deficit.If there is no Ricardo-Barro effect, the budget deficit ________ the real interest rate and ________ the equilibrium quantity of investment.

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

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

Which of the following shifts the supply of loanable funds curve?

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

The demand for loanable funds curve shifts in response to changes in

As the economy enters a strong expansion, then firms' demand for loanable funds

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

Net investment is

At the beginning of the year, AAA-1 Towing owns trucks and buildings for a total value of $1 million.During the year, it invests $250,000 to replace towing trucks worth $230,000 destroyed in a flood and to cover $50,000 worth of depreciation.AAA-1 Towing's capital stock at the end of the year was

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

If there is no Ricardo-Barro effect, a government budget surplus the total supply of loanable funds and the real interest rate.

-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.The equilibrium interest rate is percent and the equilibrium quantity of loanable funds is .

In 2010, the U.S.federal government had a budget deficit.If there is no Ricardo-Barro effect, the budget deficit the real interest rate and the equilibrium quantity of investment.

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