Question 1

If Congress instituted an investment tax credit,the interest rate would

Accepted Answer

A) rise and saving would rise. 
B) fall and saving would fall. 
C) rise and saving would fall. 
D) fall and saving would rise. 
A) rise and saving would rise. 
B) fall and saving would fall. 
C) rise and saving would fall. 
D) fall and saving would rise. A

Question 2

Suppose a country had a smaller increase in debt in 2011 than it had in 2010.Then other things the same,we would expect

Accepted Answer

A) lower interest rates and investment in 2011 than in 2010. 
B) lower interest rates and greater investment in 2011 than in 2010. 
C) higher interest rates and greater investment in 2011 than in 2010. 
D) higher interest rates and lower investment in 2011 than in 2010. 
A) lower interest rates and investment in 2011 than in 2010. 
B) lower interest rates and greater investment in 2011 than in 2010. 
C) higher interest rates and greater investment in 2011 than in 2010. 
D) higher interest rates and lower investment in 2011 than in 2010. B

Question 3

Other things the same,when the interest rate rises,

Accepted Answer

A) people would want to lend more,making the supply of loanable funds increase. 
B) people would want to lend less,making the supply of loanable funds decrease. 
C) people would want to lend more,making the quantity of loanable funds supplied increase. 
D) people would want to lend less,making the quantity of loanable funds supplied decrease. 
A) people would want to lend more,making the supply of loanable funds increase. 
B) people would want to lend less,making the supply of loanable funds decrease. 
C) people would want to lend more,making the quantity of loanable funds supplied increase. 
D) people would want to lend less,making the quantity of loanable funds supplied decrease. C

Question 4

The slope of the demand for loanable funds curve represents the

Accepted Answer

A) positive relation between the real interest rate and investment. 
B) negative relation between the real interest rate and investment. 
C) positive relation between the real interest rate and saving. 
D) negative relation between the real interest rate and saving. 
A) positive relation between the real interest rate and investment. 
B) negative relation between the real interest rate and investment. 
C) positive relation between the real interest rate and saving. 
D) negative relation between the real interest rate and saving.

Question 5

If the supply for loanable funds shifts to the left,then the equilibrium interest rate

Accepted Answer

A) and quantity of loanable funds rises. 
B) and quantity of loanable funds falls. 
C) rises and the quantity of loanable funds falls. 
D) falls and the quantity of loanable funds rises. 
A) and quantity of loanable funds rises. 
B) and quantity of loanable funds falls. 
C) rises and the quantity of loanable funds falls. 
D) falls and the quantity of loanable funds rises.

Question 6

The slope of the supply of loanable funds is based on the logic that an increase in interest rates

Accepted Answer

A) makes saving more attractive. 
B) makes saving less attractive. 
C) makes investment more attractive. 
D) makes investment less attractive. 
A) makes saving more attractive. 
B) makes saving less attractive. 
C) makes investment more attractive. 
D) makes investment less attractive.

Question 7

Interest rates fall and investment falls.Which of the following could explain these changes?

Accepted Answer

A) The government goes from a surplus to a deficit. 
B) The government repeals an investment tax credit. 
C) The government replaces a consumption tax with an income tax. 
D) None of the above is correct. 
A) The government goes from a surplus to a deficit. 
B) The government repeals an investment tax credit. 
C) The government replaces a consumption tax with an income tax. 
D) None of the above is correct.

Question 8

For an imaginary economy,when the real interest rate is 5 percent,the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000.Currently,the nominal interest rate is 9 percent and the inflation rate is 2 percent.Currently,

Accepted Answer

A) the market for loanable funds is in equilibrium. 
B) the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will rise. 
C) the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will fall. 
D) the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,and as a result the real interest rate will rise. 
A) the market for loanable funds is in equilibrium. 
B) the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will rise. 
C) the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will fall. 
D) the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,and as a result the real interest rate will rise.

Question 9

Other things the same,a government budget deficit

Accepted Answer

A) reduces public saving,but not national saving. 
B) reduces national saving,but not public saving. 
C) reduces both public and national saving. 
D) reduces neither public saving nor national saving. 
A) reduces public saving,but not national saving. 
B) reduces national saving,but not public saving. 
C) reduces both public and national saving. 
D) reduces neither public saving nor national saving.

Question 10

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Accepted Answer

A) There would be an increase in the amount of loanable funds borrowed. 
B) There would be a reduction in the amount of loanable funds borrowed. 
C) There would be no change in the amount of loanable funds borrowed. 
D) The change in loanable funds is uncertain. 
A) There would be an increase in the amount of loanable funds borrowed. 
B) There would be a reduction in the amount of loanable funds borrowed. 
C) There would be no change in the amount of loanable funds borrowed. 
D) The change in loanable funds is uncertain.

Question 11

A policy that induces people to save more shifts

Accepted Answer

A) the supply of loanable funds rightward and increases investment. 
B) the supply of loanable funds leftward and decreases investment. 
C) the supply of loanable funds rightward and decreases investment. 
D) the supply of loanable funds leftward and increases investment. 
A) the supply of loanable funds rightward and increases investment. 
B) the supply of loanable funds leftward and decreases investment. 
C) the supply of loanable funds rightward and decreases investment. 
D) the supply of loanable funds leftward and increases investment.

Question 12

Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds?

Accepted Answer

A) The demand for loanable funds shifted rightward. 
B) The demand for loanable funds shifted leftward. 
C) The supply of loanable funds shifted rightward. 
D) The supply of loanable funds shifted leftward. 
A) The demand for loanable funds shifted rightward. 
B) The demand for loanable funds shifted leftward. 
C) The supply of loanable funds shifted rightward. 
D) The supply of loanable funds shifted leftward.

Question 13

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free.This would shift the

Accepted Answer

A) supply of loanable funds to the right,causing interest rates to fall. 
B) supply of loanable funds to the left,causing interest rates to rise. 
C) demand for loanable funds to the right,causing interest rates to rise. 
D) demand for loanable funds to the left,causing interest rates to fall. 
A) supply of loanable funds to the right,causing interest rates to fall. 
B) supply of loanable funds to the left,causing interest rates to rise. 
C) demand for loanable funds to the right,causing interest rates to rise. 
D) demand for loanable funds to the left,causing interest rates to fall.

Question 14

The financial system is important because it helps to match one person’s _____ with another person’s _____.

Accepted Answer

The answer of The financial system is important because it...

Question 15

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Accepted Answer

A) Interest rates would rise. 
B) Interest rates would be unaffected. 
C) Interest rates would fall. 
D) The effect on the interest rate is uncertain. 
A) Interest rates would rise. 
B) Interest rates would be unaffected. 
C) Interest rates would fall. 
D) The effect on the interest rate is uncertain.

Question 16

A government reduces its budget deficit,but at the same time people become concerned that the outlook for future government expenditures and revenues increase the chance it will default.Which of the following is correct?

Accepted Answer

A) The reduced budget deficit will raise interest rates in general.The increased risk of default will raise interest rates on government bonds. 
B) The reduced budget deficit will raise interest rates in general.The increased risk of default will reduce interest rates on government bonds. 
C) The reduced budget deficit will reduce interest rates in general.The increased risk of default will raise interest rates on government bonds. 
D) The reduced budget deficit will reduce interest rates in general.The increased risk of default will reduce interest rates on government bonds. 
A) The reduced budget deficit will raise interest rates in general.The increased risk of default will raise interest rates on government bonds. 
B) The reduced budget deficit will raise interest rates in general.The increased risk of default will reduce interest rates on government bonds. 
C) The reduced budget deficit will reduce interest rates in general.The increased risk of default will raise interest rates on government bonds. 
D) The reduced budget deficit will reduce interest rates in general.The increased risk of default will reduce interest rates on government bonds.

Question 17

Which of the following policy changes would lead to a decrease in the real interest rate and an increase in investment and saving?

Accepted Answer

A) a larger investment tax credit 
B) an expansion of eligibility for Individual Retirement Accounts 
C) an increase in income-tax rates,with no change in the government budget deficit or surplus 
D) an increase in government purchases,with no change in taxes 
A) a larger investment tax credit 
B) an expansion of eligibility for Individual Retirement Accounts 
C) an increase in income-tax rates,with no change in the government budget deficit or surplus 
D) an increase in government purchases,with no change in taxes

Question 18

Which of the following is $\bold{NOT}$ correct?

Accepted Answer

A) Many economist oppose increases in how much people save. 
B) Saving is an important long-run determinant of a nation's standard of living. 
C) A change in tax laws that encouraged greater saving would lower interest rates. 
D) Taxes on interest income can substantially decrease the future value of current saving. 
A) Many economist oppose increases in how much people save. 
B) Saving is an important long-run determinant of a nation's standard of living. 
C) A change in tax laws that encouraged greater saving would lower interest rates. 
D) Taxes on interest income can substantially decrease the future value of current saving.

Question 19

What is a bond buyer promised when she buys a bond?

Accepted Answer

The answer of What is a bond buyer promised when...

Question 20

An increase in the budget deficit would cause a

Accepted Answer

A) shortage of loanable funds at the original interest rate,which would lead to falling interest rates. 
B) surplus of loanable funds at the original interest rate,which would lead to rising interest rates. 
C) shortage of loanable funds at the original interest rate,which would lead to rising interest rates. 
D) surplus of loanable funds at the original interest rate,which would lead to falling interest rates. 
A) shortage of loanable funds at the original interest rate,which would lead to falling interest rates. 
B) surplus of loanable funds at the original interest rate,which would lead to rising interest rates. 
C) shortage of loanable funds at the original interest rate,which would lead to rising interest rates. 
D) surplus of loanable funds at the original interest rate,which would lead to falling interest rates.

Exam 13: Saving Investment and the Financial System: The Market for Loanable Funds

If Congress instituted an investment tax credit,the interest rate would

Suppose a country had a smaller increase in debt in 2011 than it had in 2010.Then other things the same,we would expect

Other things the same,when the interest rate rises,

The slope of the demand for loanable funds curve represents the

If the supply for loanable funds shifts to the left,then the equilibrium interest rate

The slope of the supply of loanable funds is based on the logic that an increase in interest rates

Interest rates fall and investment falls.Which of the following could explain these changes?

For an imaginary economy,when the real interest rate is 5 percent,the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000.Currently,the nominal interest rate is 9 percent and the inflation rate is 2 percent.Currently,

Other things the same,a government budget deficit

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

A policy that induces people to save more shifts

Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds?

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free.This would shift the

The financial system is important because it helps to match one person’s _____ with another person’s _____.

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

A government reduces its budget deficit,but at the same time people become concerned that the outlook for future government expenditures and revenues increase the chance it will default.Which of the following is correct?

Which of the following policy changes would lead to a decrease in the real interest rate and an increase in investment and saving?

Which of the following is NOT\bold{NOT}NOT correct?

What is a bond buyer promised when she buys a bond?

An increase in the budget deficit would cause a

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

The financial system is important because it helps to match one person’s _ with another person’s _.

Which of the following is $\bold{NOT}$ correct?