Question 1

A restaurant chain announces declining revenues.What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

Accepted Answer

default ri...

Question 2

The supply of loanable funds slopes

Accepted Answer

A)  upward because an increase in the interest rate induces people to save more.
B)  downward because an increase in the interest rate induces people to save less.
C)  downward because an increase in the interest rate induces people to invest less.
D)  upward because an increase in the interest rate induces people to invest more.E) C) and D)
F) B) and C)

Question 3

An increase in the quantity of loanable funds traded means that

Accepted Answer

A)  firms are borrowing less and investment decreases.
B)  firms are borrowing less and investment increases.
C)  firms are borrowing more and investment increases.
D)  firms are borrowing more and investment decreases.E) B) and C)
F) None of the above

Question 4

Which of the following statements is not correct?

Accepted Answer

A)  If GDP is rising faster than debt,the government is,in some sense,living within its means.
B)  The ratio of debt to GDP in the United States has always been less than one.
C)  Debts during wars may distribute the burden of fighting the war more evenly across generations.
D)  During times of peace in the United States,the ratio of debt to GDP sometimes rose.E) None of the above
F) A) and C)

Question 5

Suppose a country has a larger increase in debt in 2014 than it had in 2013.Then other things the same,

Accepted Answer

A)  the supply of loanable funds shifts rightward and the interest rate falls.
B)  the supply of loanable funds shifts leftward and the interest rate rises.
C)  the demand for loanable funds shifts leftward and the interest rate falls.
D)  the demand for loanable funds shifts rightward and the interest rate rises.E) None of the above
F) B) and C)

Question 6

Figure 26-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. 
-Refer to Figure 26-4.The position and/or slope of the Supply curve are influenced by

Accepted Answer

A)  the level of public saving.
B)  the level of national saving.
C)  decisions made by people who have extra income they want to save and lend out.
D)  All of the above are correct.E) B) and C)
F) A) and B)

Question 7

If the government instituted an investment tax credit,then which of the following would be higher in equilibrium?

Accepted Answer

A)  saving and the interest rate
B)  saving but not the interest rate
C)  the interest rate but not saving
D)  neither saving nor the interest rateE) B) and C)
F) A) and D)

Question 8

Other things the same,an increase in taxes with no change in government purchases makes national saving

Accepted Answer

A)  rise.The supply of loanable funds shifts right.
B)  rise.The demand for loanable funds shifts right.
C)  fall.The supply of loanable funds shifts left.
D)  fall.The demand for loanable funds shifts left.E) A) and B)
F) A) and C)

Question 9

A larger budget surplus

Accepted Answer

A)  raises the interest rate and investment.
B)  reduces the interest rate and investment.
C)  raises the interest rate and reduces investment.
D)  reduces the interest rate and raises investment.E) B) and D)
F) A) and B)

Question 10

In the loanable funds model,an increase in an investment tax credit would create a

Accepted Answer

A)  shortage at the former equilibrium interest rate.This shortage would lead to a rise in the interest rate.
B)  shortage at the former equilibrium interest rate.This shortage would lead to a fall in the interest rate.
C)  surplus at the former equilibrium interest rate.This surplus would lead to a rise in the interest rate.
D)  surplus at the former equilibrium interest rate.This surplus would lead to a fall in the interest rate.E) None of the above
F) B) and D)

Question 11

Which of the following could explain a decrease in the equilibrium interest rate and 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.E) B) and D)
F) All of the above

Question 12

Which of the following counts as part of the supply of loanable funds?

Accepted Answer

A)  bank deposits and purchases of bonds
B)  bank deposits but not purchases of bonds
C)  purchases of bonds but not bank deposits
D)  neither purchases of bonds nor bank depositsE) A) and B)
F) A) and C)

Question 13

Crowding out occurs when investment declines because

Accepted Answer

A)  a budget deficit makes interest rates rise.
B)  a budget deficit makes interest rates fall.
C)  a budget surplus makes interest rates rise.
D)  a budget surplus makes interest rates fall.E) A) and C)
F) A) and B)

Question 14

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Accepted Answer

Investment spending ...

Question 15

If Congress instituted an investment tax credit

Accepted Answer

A)  it would make buying bonds more desirable,so the demand for loanable funds would shift.
B)  it would make buying capital goods more desirable,so the demand for loanable funds would shift.
C)  it would make buying bonds more desirable,so the supply of loanable funds would shift.
D)  it would make buying capital goods more desirable,so the supply of loanable funds would shift.E) A) and B)
F) B) and D)

Question 16

If the government budget deficit increases,which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

Accepted Answer

The supply of loanab...

Question 17

If a reform of the tax laws encourages greater saving,the result would be

Accepted Answer

A)  higher interest rates and greater investment.
B)  higher interest rates and less investment.
C)  lower interest rates and greater investment.
D)  lower interest rate and less investment.E) A) and B)
F) A) and C)

Question 18

The first three elements of a financial crisis are correctly represented as taking place in the following order:

Accepted Answer

A)  large decline in some asset prices → insolvencies at financial institutions → decline in confidence in financial institutions
B)  insolvencies at financial institutions → decline in confidence in financial institutions → large decline in some asset prices
C)  insolvencies at financial institutions → economic downturn → credit crunch
D)  insolvencies at financial institutions → credit crunch → economic downturnE) B) and C)
F) B) and D)

Question 19

Which of the following statements is correct?

Accepted Answer

A)  The interest rate that is usually reported is the interest rate that has been corrected for inflation.
B)  The supply of,and demand for,loanable funds depend on the real (rather than nominal) interest rate.
C)  If the nominal interest rate has decreased and the real interest rate has also decreased,then the inflation rate must have decreased as well.
D)  All of the above are correct.E) All of the above
F) None of the above

Question 20

For an imaginary economy,when the real interest rate is 7 percent,the quantity of loanable funds demanded is $500 and the quantity of loanable funds supplied is $500.Currently,the nominal interest rate is 9 percent and the inflation rate is 4 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.E) A) and C)
F) B) and C)

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

A larger budget surplus

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If the government instituted an investment tax credit,then which of the following would be higher in equilibrium?

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Crowding out occurs when investment declines because

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Which of the following statements is not correct?

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A restaurant chain announces declining revenues.What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

Correct Answerverifieddefault ri...View AnswerShow Answer

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Correct AnswerverifiedInvestment spending ...View AnswerShow Answer

If Congress instituted an investment tax credit

Correct AnswerverifiedShow Answer

If the government budget deficit increases,which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

Correct AnswerverifiedThe supply of loanab...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Suppose a country has a larger increase in debt in 2014 than it had in 2013.Then other things the same,

Correct AnswerverifiedShow Answer

If a reform of the tax laws encourages greater saving,the result would be

Correct AnswerverifiedShow Answer

Figure 26-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 26-4.The position and/or slope of the Supply curve are influenced by

Correct AnswerverifiedShow Answer

In the loanable funds model,an increase in an investment tax credit would create a

Correct AnswerverifiedShow Answer

The supply of loanable funds slopes

Correct AnswerverifiedShow Answer

An increase in the quantity of loanable funds traded means that

Correct AnswerverifiedShow Answer

Other things the same,an increase in taxes with no change in government purchases makes national saving

Correct AnswerverifiedShow Answer

The first three elements of a financial crisis are correctly represented as taking place in the following order:

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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For an imaginary economy,when the real interest rate is 7 percent,the quantity of loanable funds demanded is $500 and the quantity of loanable funds supplied is $500.Currently,the nominal interest rate is 9 percent and the inflation rate is 4 percent.Currently,

Correct AnswerverifiedShow Answer

Which of the following counts as part of the supply of loanable funds?

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Investment spending ...
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The supply of loanab...
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