Exam 7: Finance, Saving, and Investment

Which of the following is TRUE regarding the effect expected future income has on saving? I.As expected future income increases, saving increases. II.Young people typically save very little. III.Middle aged people, earning higher incomes, are not very big savers.

What are the factors that change the supply of saving and shift the supply of loanable funds curve?

According to the Ricardo-Barro effect

If you lend a dollar for a year and at the end of the year the price level has risen by 10 percent

-In the above figure, the initial supply of loanable funds curve is SLF? and the initial demand for loanable funds curve is DLF?. An increase in the expected profit would

There is a positive relationship between the demand for loanable funds and the real interest rate.

If the nominal interest rate is 8 percent and inflation is 3 percent, approximately what is the real interest rate?

In the loanable funds market, an increase in wealth shifts the ________ loanable funds curve ________.

In the absence of a Ricardo-Barro effect, a government budget deficit ________ the demand for loanable funds, ________ the real interest rate, and ________ investment.

A decrease in the real interest rate leads to a ________ the demand for loanable funds curve, and a decrease in the expected profit leads to a ________ the demand for loanable funds curve.

The ________ interest rate approximately equals the ________ interest rate minus ________.

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

When the inflation rate is positive, the

How does expected future income affect saving supply?

The crowding-out effect refers to

The supply of loanable funds curve shifts leftward if the real interest rate rises.

-In the above figure, if the real interest rate is 6 percent, the quantity of loanable funds demanded is

In 2007, France's GDP totaled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. Suppose that depreciation is 12 percent of GDP. ________ investment in 2006 was ________ billion.

-In the above figure, a decrease in the real interest rate will result in a movement from point E to

Which of the following are included in the supply of loanable funds? I.private saving II.government budget surplus III.international borrowing