Question 1

Bond A and Bond B are identical except Bond B has a longer term. Therefore, we expect Bond _____ to pay a higher rate of interest.

Accepted Answer

The answer of Bond A and Bond B are identical...

Question 2

If the inflation rate is 2 percent and the real interest rate is 7 percent,then the nominal interest rate is

Accepted Answer

A)  3.5 percent.
B)  5 percent.
C)  9 percent
D)  7 percent.E) A) and D)
F) B) and D)

Question 3

If the budget deficit increases then

Accepted Answer

A)  saving and the interest rate rise.
B)  saving rises and the interest rate falls.
C)  saving falls and the interest rate rises.
D)  saving and the interest rate fall.E) A) and B)
F) All of the above

Question 4

Bolivia had a smaller budget deficit in 2003 than in 2002.Other things the same,we would expect this reduction in the budget deficit to have

Accepted Answer

A)  increased both interest rates and investment.
B)  increased interest rates and decreased investment.
C)  decreased interest rates and increased investment.
D)  decreased both interest rates and investment.E) B) and C)
F) B) and D)

Question 5

From 2009 to 2012,the federal government's budget deficit was about

Accepted Answer

A)  5 percent of GDP,and this led to the highest debt-GDP ratio in U.S history.
B)  10 percent of GDP,and this led to the highest debt-GDP ratio in U.S history.
C)  5 percent of GDP,and this led to the highest debt-GDP ratio since World War II.
D)  9 percent of GDP,and this led to the highest debt-GDP ratio since World War II.E) A) and C)
F) B) and C)

Question 6

In a closed economy taxes are $750 billion,government transfers are $400 billion,government expenditures are $500 billion,and investment is $400 billion.What are private saving,public saving and national saving?

Accepted Answer

Private saving is $550 billion...

Question 7

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

Accepted Answer

A)  The supply of loanable funds would shift rightward and investment would increase.
B)  The supply of loanable funds would shift leftward and investment would decrease.
C)  The demand for loanable funds would shift rightward and investment would increase.
D)  The demand for loanable funds would shift leftward and investment would decrease.E) None of the above
F) All of the above

Question 8

If at some interest rate desired investment is $400 billion,desired private saving is $600 billion,and the budget deficit is $300 billion,is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

Accepted Answer

There is a...

Question 9

The slope of the supply of loanable funds curve represents the

Accepted Answer

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

Question 10

In the terminology of macroeconomics,what's the difference between a saver and an investor?

Accepted Answer

A saver earns more than he spe...

Question 11

Suppose there is a shortage in the market for loanable funds.Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Accepted Answer

The interest rate is...

Question 12

The nominal interest rate increases by 5 percent.What is the effect on investment?

Accepted Answer

A)  The real interest rate increases and investment increases
B)  ​The real interest rate decreases and investment decreases.
C)  ​The real interest rate increases and investment decreases.
D)  ​Cannot be determined from the given informationE) A) and D)
F) None of the above

Question 13

If the supply of loanable funds shifts to the right,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.E) B) and D)
F) B) and C)

Question 14

If the nominal interest rate is 3 percent and the inflation rate is 4 percent,then the real interest rate is

Accepted Answer

A)  7 percent.
B)  -1 percent.
C)  3 percent.
D)  4 percent.E) None of the above
F) All of the above

Question 15

A change in the tax laws that increases the supply of loanable funds will have a smaller effect on investment when

Accepted Answer

A)  the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic.
B)  the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic.
C)  both the demand for and supply of loanable funds are more elastic.
D)  both the demand for and supply of loanable funds are more inelastic.E) B) and D)
F) A) and C)

Question 16

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 26-3.Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Accepted Answer

A)  a movement from Point A to Point C
B)  a movement from Point B to Point A
C)  a movement from Point B to Point F
D)  a movement from Point C to Point BE) A) and B)
F) A) and C)

Question 17

In 2002 mortgage rates fell and mortgage lending increased.Which of the following could explain both of these changes?

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.E) None of the above
F) A) and B)

Question 18

Figure 26-1.The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. 
-Refer to Figure 26-1.Which of the following events would shift the supply curve from S1 to S2?

Accepted Answer

A)  In response to tax reform,firms are encouraged to invest more than they previously invested.
B)  In response to tax reform,households are encouraged to save more than they previously saved.
C)  Government goes from running a balanced budget to running a budget deficit.
D)  Any of the above events would shift the supply curve from S1 to S2.E) A) and B)
F) A) and C)

Question 19

A budget deficit

Accepted Answer

A)  changes the supply of loanable funds.
B)  changes the demand for loanable funds.
C)  changes both the supply of and demand for loanable funds.
D)  does not influence the supply of or the demand for loanable funds.E) A) and B)
F) A) and C)

Question 20

Public saving is the difference between _____ and _____.

Accepted Answer

tax revenue, governm...

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

Suppose there is a shortage in the market for loanable funds.Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Correct AnswerverifiedThe interest rate is...View AnswerShow Answer

A change in the tax laws that increases the supply of loanable funds will have a smaller effect on investment when

Correct AnswerverifiedShow Answer

In the terminology of macroeconomics,what's the difference between a saver and an investor?

Correct AnswerverifiedA saver earns more than he spe...View AnswerShow Answer

Public saving is the difference between _____ and _____.

Correct Answerverifiedtax revenue, governm...View AnswerShow Answer

If the nominal interest rate is 3 percent and the inflation rate is 4 percent,then the real interest rate is

Correct AnswerverifiedShow Answer

Figure 26-1.The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. -Refer to Figure 26-1.Which of the following events would shift the supply curve from S1 to S2?

Correct AnswerverifiedShow Answer

The slope of the supply of loanable funds curve represents the

Correct AnswerverifiedShow Answer

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3.Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Correct AnswerverifiedShow Answer

The nominal interest rate increases by 5 percent.What is the effect on investment?

Correct AnswerverifiedShow Answer

Bond A and Bond B are identical except Bond B has a longer term. Therefore, we expect Bond _____ to pay a higher rate of interest.

Correct AnswerverifiedShow Answer

If the budget deficit increases then

Correct AnswerverifiedShow Answer

If at some interest rate desired investment is $400 billion,desired private saving is $600 billion,and the budget deficit is $300 billion,is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

Correct AnswerverifiedThere is a...View AnswerShow Answer

In a closed economy taxes are $750 billion,government transfers are $400 billion,government expenditures are $500 billion,and investment is $400 billion.What are private saving,public saving and national saving?

Correct AnswerverifiedPrivate saving is $550 billion...View AnswerShow Answer

If the inflation rate is 2 percent and the real interest rate is 7 percent,then the nominal interest rate is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A budget deficit

Correct AnswerverifiedShow Answer

In 2002 mortgage rates fell and mortgage lending increased.Which of the following could explain both of these changes?

Correct AnswerverifiedShow Answer

From 2009 to 2012,the federal government's budget deficit was about

Correct AnswerverifiedShow Answer

If the supply of loanable funds shifts to the right,then the equilibrium interest rate

Correct AnswerverifiedShow Answer

Bolivia had a smaller budget deficit in 2003 than in 2002.Other things the same,we would expect this reduction in the budget deficit to have

Correct AnswerverifiedShow Answer

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The interest rate is...
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A saver earns more than he spe...
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Public saving is the difference between _ and _.

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tax revenue, governm...
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There is a...
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Private saving is $550 billion...
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