Question 1

-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF?. What happens if the real interest rate rises?

Accepted Answer

A)  Nothing; the economy would remain at point a. 
B)  There would be a movement to a point such as b on supply of loanable funds curve SLF?. 
C)  The supply of loanable funds curve would shift rightward to a curve such as SLF?. 
D)  The supply of loanable funds curve would shift leftward to a curve such as SLF?. 
A)  Nothing; the economy would remain at point a. 
B)  There would be a movement to a point such as b on supply of loanable funds curve SLF?. 
C)  The supply of loanable funds curve would shift rightward to a curve such as SLF?. 
D)  The supply of loanable funds curve would shift leftward to a curve such as SLF?. B

Question 2

Households will choose to save more if

Accepted Answer

A)  income is expected to decrease in the future. 
B)  current disposable income increases. 
C)  Both answers A and B are correct. 
D)  Neither answer A nor B is correct. 
A)  income is expected to decrease in the future. 
B)  current disposable income increases. 
C)  Both answers A and B are correct. 
D)  Neither answer A nor B is correct. C

Question 3

-In the above figure, if the real interest rate is 8, there is

Accepted Answer

A)  underproduction in this economy. 
B)  a surplus of loanable funds. 
C)  a shortage of loanable funds. 
D)  a shortage in available funds for investment. 
A)  underproduction in this economy. 
B)  a surplus of loanable funds. 
C)  a shortage of loanable funds. 
D)  a shortage in available funds for investment. B

Question 4

In 2010, the United States and foreign economies start to recover from the recession. U.S. firms increase their profit expectations. As a result, the demand for loanable funds curve shifts ________ and the real interest rate ________.

Accepted Answer

A)  leftward; decreases 
B)  rightward; decreases 
C)  leftward; increases 
D)  rightward; increases 
A)  leftward; decreases 
B)  rightward; decreases 
C)  leftward; increases 
D)  rightward; increases

Question 5

During the financial crisis in 2007 and 2008, financial institutions believed that default risks were higher. As a result, there was ________ in the supply of loanable funds and a ________ in the real interest rate.

Accepted Answer

A)  a decrease; fall 
B)  an increase; rise 
C)  an increase; fall 
D)  a decrease; rise 
A)  a decrease; fall 
B)  an increase; rise 
C)  an increase; fall 
D)  a decrease; rise

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. 
A)  business investment. 
B)  private saving. 
C)  government budget surplus. 
D)  international borrowing.

Question 7

If the nominal interest rate is 7 percent and the inflation rate is 1 percent, the real interest rate is approximately

Accepted Answer

A)  7 percent. 
B)  6 percent. 
C)  8 percent. 
D)  -6 percent. 
A)  7 percent. 
B)  6 percent. 
C)  8 percent. 
D)  -6 percent.

Question 8

A decrease in the government budget deficit decreases the ________ loanable funds and an increase in the government budget surplus increases the ________ loanable funds.

Accepted Answer

A)  demand for; demand for 
B)  demand for; supply of 
C)  supply of; demand for 
D)  supply of; supply of 
A)  demand for; demand for 
B)  demand for; supply of 
C)  supply of; demand for 
D)  supply of; supply of

Question 9

The increase in the capital stock equals the amount of

Accepted Answer

A)  gross investment. 
B)  depreciation. 
C)  net investment. 
D)  private sector spending. 
A)  gross investment. 
B)  depreciation. 
C)  net investment. 
D)  private sector spending.

Question 10

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

Accepted Answer

A)  $20,000.00. 
B)  $0. 
C)  $90,000.00. 
D)  $100,000.00. 
A)  $20,000.00. 
B)  $0. 
C)  $90,000.00. 
D)  $100,000.00.

Question 11

If households believe their incomes will fall in the future, the result is a

Accepted Answer

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

Question 12

What is the approximate relationship among the real interest rate, the inflation rate, and the nominal interest rate?

Accepted Answer

The real interest ra

Question 13

When the real interest rate rises

Accepted Answer

A)  there is a downward movement along the demand for loanable funds curve. 
B)  there is an upward movement along the demand for loanable funds curve. 
C)  the demand for loanable funds curve shifts rightward. 
D)  the demand for loanable funds curve shifts leftward. 
A)  there is a downward movement along the demand for loanable funds curve. 
B)  there is an upward movement along the demand for loanable funds curve. 
C)  the demand for loanable funds curve shifts rightward. 
D)  the demand for loanable funds curve shifts leftward.

Question 14

Saving by households

Accepted Answer

A)  decreases when the real interest rate rises. 
B)  increases when the real interest rate rises. 
C)  increases when the real interest rate falls. 
D)  is unaffected by the real interest rate. 
A)  decreases when the real interest rate rises. 
B)  increases when the real interest rate rises. 
C)  increases when the real interest rate falls. 
D)  is unaffected by the real interest rate.

Question 15

Investment is financed by which of the following?
I.Government spending
II.National saving
III.Borrowing from the rest of the world

Accepted Answer

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

Question 16

The Ricardo-Barro effect asserts that

Accepted Answer

A)  government saving affects private saving. 
B)  government budget deficits crowd out private borrowing. 
C)  government expenditure affects private expenditure. 
D)  taxation raises interest rates. 
A)  government saving affects private saving. 
B)  government budget deficits crowd out private borrowing. 
C)  government expenditure affects private expenditure. 
D)  taxation raises interest rates.

Question 17

In 2008, the many people became unable to make payments on their mortgages and instead defaulted on them. As a result, the ________ of loanable funds curve shifts ________ and real interest rate ________.

Accepted Answer

A)  supply; leftward; increases 
B)  demand; leftward; increases. 
C)  supply; rightward; falls. 
D)  demand; rightward; decreases. 
A)  supply; leftward; increases 
B)  demand; leftward; increases. 
C)  supply; rightward; falls. 
D)  demand; rightward; decreases.

Question 18

When the actual real interest rate is less than the equilibrium real interest rate

Accepted Answer

A)  the equilibrium real interest rate will rise. 
B)  borrowers find it difficult to borrow. 
C)  there is a shortage of loanable funds. 
D)  Both answers B and C are correct. 
A)  the equilibrium real interest rate will rise. 
B)  borrowers find it difficult to borrow. 
C)  there is a shortage of loanable funds. 
D)  Both answers B and C are correct.

Question 19

The quantity of ________ by households will be less ________.

Accepted Answer

A)  saving; the higher is disposable income 
B)  saving; the lower is the real interest rate 
C)  consumption; the lower is the inflation rate 
D)  consumption; the higher is disposable income 
A)  saving; the higher is disposable income 
B)  saving; the lower is the real interest rate 
C)  consumption; the lower is the inflation rate 
D)  consumption; the higher is disposable income

Question 20

Which of the following will shift the supply of loanable funds curve leftward?

Accepted Answer

A)  a decrease in the real interest rate 
B)  a decrease in real wealth 
C)  a decrease in disposable income 
D)  a decrease in expected future income 
A)  a decrease in the real interest rate 
B)  a decrease in real wealth 
C)  a decrease in disposable income 
D)  a decrease in expected future income

-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF?. What happens if the real interest rate rises?

Households will choose to save more if

-In the above figure, if the real interest rate is 8, there is

In 2010, the United States and foreign economies start to recover from the recession. U.S. firms increase their profit expectations. As a result, the demand for loanable funds curve shifts and the real interest rate .

During the financial crisis in 2007 and 2008, financial institutions believed that default risks were higher. As a result, there was in the supply of loanable funds and a in the real interest rate.

All of the following are sources of loanable funds EXCEPT

If the nominal interest rate is 7 percent and the inflation rate is 1 percent, the real interest rate is approximately

A decrease in the government budget deficit decreases the loanable funds and an increase in the government budget surplus increases the loanable funds.

The increase in the capital stock equals the amount of

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

If households believe their incomes will fall in the future, the result is a

What is the approximate relationship among the real interest rate, the inflation rate, and the nominal interest rate?

When the real interest rate rises

Saving by households

Investment is financed by which of the following? I.Government spending II.National saving III.Borrowing from the rest of the world

The Ricardo-Barro effect asserts that

In 2008, the many people became unable to make payments on their mortgages and instead defaulted on them. As a result, the of loanable funds curve shifts and real interest rate .

When the actual real interest rate is less than the equilibrium real interest rate

The quantity of by households will be less .

Which of the following will shift the supply of loanable funds curve leftward?

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 7: Finance, Saving, and Investment

-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF?. What happens if the real interest rate rises?

Households will choose to save more if

-In the above figure, if the real interest rate is 8, there is

In 2010, the United States and foreign economies start to recover from the recession. U.S. firms increase their profit expectations. As a result, the demand for loanable funds curve shifts ________ and the real interest rate ________.

During the financial crisis in 2007 and 2008, financial institutions believed that default risks were higher. As a result, there was ________ in the supply of loanable funds and a ________ in the real interest rate.

All of the following are sources of loanable funds EXCEPT

If the nominal interest rate is 7 percent and the inflation rate is 1 percent, the real interest rate is approximately

A decrease in the government budget deficit decreases the ________ loanable funds and an increase in the government budget surplus increases the ________ loanable funds.

The increase in the capital stock equals the amount of

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

If households believe their incomes will fall in the future, the result is a

What is the approximate relationship among the real interest rate, the inflation rate, and the nominal interest rate?

When the real interest rate rises

Saving by households

Investment is financed by which of the following? I.Government spending II.National saving III.Borrowing from the rest of the world

The Ricardo-Barro effect asserts that

In 2008, the many people became unable to make payments on their mortgages and instead defaulted on them. As a result, the ________ of loanable funds curve shifts ________ and real interest rate ________.

When the actual real interest rate is less than the equilibrium real interest rate

The quantity of ________ by households will be less ________.

Which of the following will shift the supply of loanable funds curve leftward?

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

In 2010, the United States and foreign economies start to recover from the recession. U.S. firms increase their profit expectations. As a result, the demand for loanable funds curve shifts and the real interest rate .

During the financial crisis in 2007 and 2008, financial institutions believed that default risks were higher. As a result, there was in the supply of loanable funds and a in the real interest rate.

A decrease in the government budget deficit decreases the loanable funds and an increase in the government budget surplus increases the loanable funds.

In 2008, the many people became unable to make payments on their mortgages and instead defaulted on them. As a result, the of loanable funds curve shifts and real interest rate .

The quantity of by households will be less .