Question 1

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 26-3.What,specifically,does the label on the vertical axis,i,represent?

Accepted Answer

A)  the nominal interest rate
B)  the real interest rate
C)  the inflation rate
D)  the dividend yieldE) B) and D)
F) B) and C)

Question 2

The interest rate will _____ and the quantity of loanable funds invested will _____ when the government decreases the budget deficit.

Accepted Answer

The answer of The interest rate will _____ and the...

Question 3

The supply of loanable funds would shift to the right if either

Accepted Answer

A)  tax reforms encouraged greater saving or the budget deficit became smaller.
B)  tax reforms encouraged greater saving or investment tax credits were increased.
C)  the budget deficit became larger or investment tax credits were increased.
D)  the budget deficit became larger or tax reforms discouraged saving.E) B) and D)
F) A) and D)

Question 4

Congress and the President implement an investment tax credit.Which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

Accepted Answer

The demand for loana...

Question 5

Suppose a country has a consumption tax that is similar to a state sales tax.If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings,what would happen?

Accepted Answer

A)  There would be no change in the interest rate or saving.
B)  The interest rate would decrease and saving would increase.
C)  The interest rate would increase and saving would decrease.
D)  None of the above is correct.E) A) and C)
F) A) and D)

Question 6

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market?

Accepted Answer

A)  an increase in the supply of or a decrease in the demand for loanable funds
B)  an increase in the supply of or an increase in the demand for loanable funds
C)  a decrease in the supply of or a decrease in the demand for loanable funds
D)  a decrease in the supply of or an increase in the demand for loanable fundsE) B) and C)
F) A) and D)

Question 7

If there is a shortage of loanable funds,then

Accepted Answer

A)  the quantity demanded is greater than the quantity supplied and the interest rate will rise.
B)  the quantity demanded is greater than the quantity supplied and the interest rate will fall.
C)  the quantity supplied is greater than the quantity demanded and the interest rate will rise.
D)  the quantity supplied is greater than the quantity demanded and the interest rate will fall.E) A) and D)
F) A) and C)

Question 8

If the nominal interest rate is 2.5 percent and the inflation rate is 2 percent,what is the real interest rate?

Accepted Answer

A)  .5 percent
B)  1.25 percent
C)  4.5 percent
D)  None of the above is correct.E) B) and C)
F) A) and D)

Question 9

A policy that induces people to save more shifts

Accepted Answer

A)  the supply of loanable funds and raises interest rates.
B)  the supply of loanable funds and reduces interest rates.
C)  the demand for loanable funds and raises interest rates.
D)  the demand for loanable funds and reduces interest rates.E) A) and D)
F) A) and B)

Question 10

If federal tax rates increased,what would happen to the interest rate on municipal bonds?

Accepted Answer

the intere...

Question 11

What variable adjusts to balance demand and supply in the market for loanable funds?

Accepted Answer

The real i...

Question 12

Which of the following is correct?

Accepted Answer

A)  In a closed economy,equilibrium in the market for loanable funds occurs where saving = investment.
B)  Investment is the source for the supply of loanable funds.
C)  If there is a surplus in the market for loanable funds,the interest rate rises.
D)  All of the above are correctE) B) and D)
F) C) and D)

Question 13

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

Accepted Answer

A)  there is a surplus and the interest rate is above the equilibrium level.
B)  there is a surplus and the interest rate is below the equilibrium level.
C)  there is a shortage and the interest rate is above the equilibrium level.
D)  there is a shortage and the interest rate is below the equilibrium level.E) B) and C)
F) A) and D)

Question 14

If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds,rather than the supply of loanable funds,then

Accepted Answer

A)  crowding out would not be a consequence of an increase in the budget deficit.
B)  higher interest rates would not be a consequence of an increase in the budget deficit.
C)  an increase in the budget deficit would cause the demand for loanable funds to decrease.
D)  we would be making only a semantic change in how we analyze the effects of government budget deficits.E) B) and D)
F) C) and D)

Question 15

The two most important financial markets are the _____ market and the _____ market.

Accepted Answer

bond, stoc...

Question 16

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 and demand for loanable funds would shift right.
B)  The supply of and demand for loanable funds would shift left.
C)  The supply of loanable funds would shift right and the demand for loanable funds would shift left.
D)  None of the above is correct.E) All of the above
F) None of the above

Question 17

Figure 26-1.The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. 
-Refer to Figure 26-1.What is measured along the vertical axis of the graph?

Accepted Answer

A)  the nominal interest rate
B)  the real interest rate
C)  the quantity of investment
D)  the quantity of savingE) None of the above
F) A) and D)

Question 18

In a closed economy,GDP is $1000,government purchases are $200,and consumption is $700.If the government has a budget surplus of $25,what are investment,taxes,private saving,and national saving?

Accepted Answer

Investment = $100, T...

Question 19

If there is a surplus 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) A) and B)
F) None of the above

Question 20

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.If the equilibrium quantity of loanable funds is $50 billion and if the equilibrium nominal interest rate is 8 percent,then

Accepted Answer

A)  there is an excess supply of loanable funds at a real interest rate of 6 percent.
B)  there is an excess demand for loanable funds at a real interest rate of 8 percent.
C)  the rate of inflation is approximately 2 percent.
D)  the rate of inflation is approximately 14 percent.E) A) and D)
F) None of the above

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

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

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A policy that induces people to save more shifts

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If federal tax rates increased,what would happen to the interest rate on municipal bonds?

Correct Answerverifiedthe intere...View AnswerShow 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.If the equilibrium quantity of loanable funds is $50 billion and if the equilibrium nominal interest rate is 8 percent,then

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Which of the following is correct?

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If the nominal interest rate is 2.5 percent and the inflation rate is 2 percent,what is the real interest rate?

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The supply of loanable funds would shift to the right if either

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Congress and the President implement an investment tax credit.Which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

Correct AnswerverifiedThe demand for loana...View AnswerShow Answer

If there is a surplus of loanable funds,then

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If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds,rather than the supply of loanable funds,then

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Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3.What,specifically,does the label on the vertical axis,i,represent?

Correct AnswerverifiedShow Answer

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

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If there is a shortage of loanable funds,then

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What variable adjusts to balance demand and supply in the market for loanable funds?

Correct AnswerverifiedThe real i...View AnswerShow 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.What is measured along the vertical axis of the graph?

Correct AnswerverifiedShow Answer

The interest rate will _____ and the quantity of loanable funds invested will _____ when the government decreases the budget deficit.

Correct AnswerverifiedShow Answer

The two most important financial markets are the _____ market and the _____ market.

Correct Answerverifiedbond, stoc...View AnswerShow Answer

In a closed economy,GDP is $1000,government purchases are $200,and consumption is $700.If the government has a budget surplus of $25,what are investment,taxes,private saving,and national saving?

Correct AnswerverifiedInvestment = $100, T...View AnswerShow Answer

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market?

Correct AnswerverifiedShow Answer

Suppose a country has a consumption tax that is similar to a state sales tax.If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings,what would happen?

Correct AnswerverifiedShow Answer

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the intere...
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The demand for loana...
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The real i...
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The interest rate will _ and the quantity of loanable funds invested will _ when the government decreases the budget deficit.

Correct Answer
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The two most important financial markets are the _ market and the _ market.

Correct Answer
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bond, stoc...
View Answer

Correct Answer
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Investment = $100, T...
View Answer

Correct Answer
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Correct Answer
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