Question 1

At some point during the financial crisis of 2008-2009,people with uninsured deposits at financial institutions withdrew money from their accounts at those institutions.This phenomenon characterized which element of the financial crisis?

Accepted Answer

A)  the decline in confidence in financial institutions
B)  the credit crunch
C)  the economic downturn
D)  the decline in asset pricesE) A) and C)
F) B) and D)

Question 2

Suppose the government changed the tax laws,with the result that people were encouraged to consume more and save less.Using the loanable funds model,a consequence would be

Accepted Answer

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

Question 3

Which of the following are effects of an increased budget deficit?

Accepted Answer

A)  the supply of loanable funds does not change;a higher interest rate reduces private saving
B)  the supply of loanable funds does not change;a higher interest rate raises private saving
C)  at any interest rate the supply of loanable funds is less;a higher interest rate reduces private saving
D)  at any interest rate the supply of loanable funds is less;a higher interest rate raises private savingE) A) and C)
F) None of the above

Question 4

Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed.The result would be that the interest rate

Accepted Answer

A)  and investment both would increase.
B)  and investment both would decrease.
C)  would increase and investment would decrease.
D)  would decrease and investment would increase.E) All of the above
F) B) and D)

Question 5

The source of the supply of loanable funds is

Accepted Answer

A)  saving,and the source of the demand for loanable funds is investment.
B)  consumption,and the source of the demand for loanable funds is investment.
C)  investment,and the source of the demand for loanable funds is saving.
D)  the interest rate,and the source of the demand for loanable funds is saving.E) A) and B)
F) A) and C)

Question 6

If the government reduces transfer payments,what happens to the budget deficit? What curve does this change in the market for loanable funds,which direction does it shift,and what happens to the equilibrium interest rate?

Accepted Answer

A reduction in transfer paymen...

Question 7

In a closed economy, Y - C - G equals _____. The variable Y is _____, C is _____, and G is _____.

Accepted Answer

national saving/inve...

Question 8

Stock in Frozen Dreams,an ice cream manufacturer,has a price to earnings ratio of 24.Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

Accepted Answer

Its price to earnings ratio is...

Question 9

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

Accepted Answer

A)  The interest rate would decrease.
B)  Investment would decrease.
C)  The standard of living would eventually rise.
D)  The supply of loanable funds would shift right.E) None of the above
F) B) and C)

Question 10

The nominal interest rate is the

Accepted Answer

A)  interest rate corrected for inflation.
B)  interest rate as usually reported by banks.
C)  real rate of return to the lender.
D)  real cost of borrowing to the borrower.E) A) and C)
F) A) and D)

Question 11

Suppose a country has only a sales tax.Now suppose it replaces the sales tax with an income tax that includes a tax on interest income.This would make equilibrium

Accepted Answer

A)  interest rates and the equilibrium quantity of loanable funds rise.
B)  interest rates rise and the equilibrium quantity of loanable funds fall.
C)  interest rates fall and the equilibrium quantity of loanable funds rise.
D)  interest rates and the equilibrium quantity of loanable funds fall.E) B) and D)
F) A) and D)

Question 12

If the government institutes policies that diminish incentives to save,then in the loanable funds market

Accepted Answer

A)  the demand for loanable funds shifts rightward.
B)  the demand for loanable funds shifts leftward.
C)  the supply of loanable funds shifts rightward.
D)  the supply of loanable funds shifts leftward.E) B) and C)
F) C) and D)

Question 13

If Canada goes from a large budget deficit to a small budget deficit,it will

Accepted Answer

A)  increase private saving and so shift the supply of loanable funds right.
B)  increase investment and so shift the demand for loanable funds right.
C)  increase public saving and so shift the supply of loanable funds right.
D)  reduce national saving and shift the supply left.E) All of the above
F) C) and D)

Question 14

Figure 26-2.The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves.
r  Q
-Refer to Figure 26-2.Which of the following events would shift the demand curve from D1 to D2?

Accepted Answer

A)  The government goes from running a budget deficit to running a budget surplus.
B)  Firms become optimistic about the future and,as a result,they plan to increase their purchases of new equipment and construction of new factories.
C)  A change in the tax laws encourages people to consume less and save more.
D)  A change in the tax laws encourages people to consume more and save less.E) A) and B)
F) A) and C)

Question 15

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 shows the effects of the government going from a budget surplus to a budget deficit?

Accepted Answer

A)  a movement from Point A to Point B
B)  a movement from Point B to Point A
C)  a movement from Point A to Point F
D)  a movement from Point B to Point CE) None of the above
F) C) and D)

Question 16

If there is a shortage of loanable funds,then

Accepted Answer

A)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium.
B)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium.
C)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium.
D)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.E) C) and D)
F) A) and D)

Question 17

As real interest rates fall,firms desire to

Accepted Answer

A)  buy more new equipment and buildings.This response helps explain why the supply of loanable funds is upward sloping.
B)  buy more new equipment and buildings.This response helps explain why the demand for loanable funds is downward sloping.
C)  buy less new equipment and buildings.This response helps explain why the supply of loanable funds is upward sloping.
D)  buy less new equipment and buildings.This response helps explain why the demand for loanable funds is downward sloping.E) All of the above
F) None of the above

Question 18

In the market for loanable funds,the interaction of the demand for,and supply of,loanable funds determines the equilibrium level of

Accepted Answer

A)  the inflation rate.
B)  gross domestic product.
C)  the real interest rate.
D)  the nominal interest rate.E) A) and B)
F) A) and D)

Question 19

When tax code changes increase saving incentives, the interest rate will _____ and investment will _____.

Accepted Answer

The answer of When tax code changes increase saving incentives,...

Question 20

Late in the 2000-2009 decade,real estate prices in the U.S.fell by a greater percentage than they had fallen since the

Accepted Answer

A)  1890s.
B)  1930s.
C)  1950s.
D)  1970s.E) A) and B)
F) B) and C)

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

If the government institutes policies that diminish incentives to save,then in the loanable funds market

Correct AnswerverifiedShow Answer

Late in the 2000-2009 decade,real estate prices in the U.S.fell by a greater percentage than they had fallen since the

Correct AnswerverifiedShow Answer

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

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 shows the effects of the government going from a budget surplus to a budget deficit?

Correct AnswerverifiedShow Answer

In a closed economy, Y - C - G equals _____. The variable Y is _____, C is _____, and G is _____.

Correct Answerverifiednational saving/inve...View AnswerShow Answer

Which of the following are effects of an increased budget deficit?

Correct AnswerverifiedShow Answer

Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed.The result would be that the interest rate

Correct AnswerverifiedShow Answer

If there is a shortage of loanable funds,then

Correct AnswerverifiedShow Answer

At some point during the financial crisis of 2008-2009,people with uninsured deposits at financial institutions withdrew money from their accounts at those institutions.This phenomenon characterized which element of the financial crisis?

Correct AnswerverifiedShow Answer

In the market for loanable funds,the interaction of the demand for,and supply of,loanable funds determines the equilibrium level of

Correct AnswerverifiedShow Answer

Stock in Frozen Dreams,an ice cream manufacturer,has a price to earnings ratio of 24.Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

Correct AnswerverifiedIts price to earnings ratio is...View AnswerShow Answer

Suppose the government changed the tax laws,with the result that people were encouraged to consume more and save less.Using the loanable funds model,a consequence would be

Correct AnswerverifiedShow Answer

The source of the supply of loanable funds is

Correct AnswerverifiedShow Answer

As real interest rates fall,firms desire to

Correct AnswerverifiedShow Answer

Suppose a country has only a sales tax.Now suppose it replaces the sales tax with an income tax that includes a tax on interest income.This would make equilibrium

Correct AnswerverifiedShow Answer

If the government reduces transfer payments,what happens to the budget deficit? What curve does this change in the market for loanable funds,which direction does it shift,and what happens to the equilibrium interest rate?

Correct AnswerverifiedA reduction in transfer paymen...View AnswerShow Answer

When tax code changes increase saving incentives, the interest rate will _____ and investment will _____.

Correct AnswerverifiedShow Answer

The nominal interest rate is the

Correct AnswerverifiedShow Answer

Figure 26-2.The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. r Q -Refer to Figure 26-2.Which of the following events would shift the demand curve from D1 to D2?

Correct AnswerverifiedShow Answer

If Canada goes from a large budget deficit to a small budget deficit,it will

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In a closed economy, Y - C - G equals ___. The variable Y is _, C is _, and G is ___.

Correct Answer
verified
national saving/inve...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Its price to earnings ratio is...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A reduction in transfer paymen...
View Answer

When tax code changes increase saving incentives, the interest rate will _ and investment will _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified