Question 1

Smiley Myrus owns a large corporation that is building a new shopping mall in Winston-Salem, North Carolina.In all likelihood Smiley's firm

Accepted Answer

A)   is a supplier of loanable funds.
B)   pays a higher rate of interest than most borrowers,based on the Fisher equation.
C)   is a borrower of loanable funds.
D)   pays a lower rate of interest than most borrowers,based on the Fisher equation.
E)   would loan its profits to foreign entities.F) A) and E)
G) A) and B)

Question 2

Those with the least patience

Accepted Answer

A)   have the greatest time preference.
B)   have the least time preference.
C)   will demand a higher nominal interest rate but not a higher real rate.
D)   will save the most.
E)   will engage in the most consumption smoothing.F) D) and E)
G) B) and D)

Question 3

Which event could be expected to shift a nation's supply of loanable funds,as shown?

Accepted Answer

A)   increased purchases of domestic stocks by foreign investors
B)   a rise in the national unemployment rate
C)   a culture-wide revival of the virtue of patience
D)   greater numbers of people choosing to keep working when they could retire
E)   a wave of working adults entering their peak-earnings yearsF) B) and C)
G) None of the above

Question 4

Assume deflation is occurring in a nation; the implication(s)

Accepted Answer

A)   are that both real and nominal interest rates are positive.
B)   are that both real and nominal interest rates are negative.
C)   is that the nominal interest rate exceeds the real interest rate.
D)   is that the real rate of interest exceeds the nominal rate of interest.
E)   is that time preferences in the nation have fallen.F) A) and D)
G) A) and C)

Question 5

Assume foreign incomes rise.Ceteris paribus (all things equal) ,this would cause

Accepted Answer

A)   the demand for loanable funds to increase.
B)   the supply of loanable funds to increase.
C)   both the demand and supply of loanable funds to increase.
D)   both the demand and supply of loanable funds to decrease.
E)   the demand of loanable funds to decrease.F) A) and E)
G) A) and C)

Question 6

Savings is the

Accepted Answer

A)   demand for loanable funds and is downward sloping.
B)   supply of loanable funds and is horizontal.
C)   supply of loanable funds and is vertical.
D)   supply of loanable funds and is upward sloping.
E)   demand for loanable funds and is upward sloping.F) D) and E)
G) A) and B)

Question 7

Refer to the following graph to answer the following questions: 
-Assuming the figure represents the market for loanable funds,which of the following would represent a general economic collapse in the United States,causing foreigners to become fearful about the U.S.economy?

Accepted Answer

A)   a shift from line 1 to line 4
B)   a shift from line 3 to line 2
C)   a shift from line 2 to line 3
D)   a shift from line 4 to line 1
E)   a new shortage of loanable funds represented by the distance from C to DF) B) and E)
G) A) and D)

Question 8

Refer to the following graph that describes income and consumption patterns over a typical life cycle to answer the following questions: 
-Which part of the accompanying graph depicts borrowing?

Accepted Answer

A)   curve A
B)   curve B
C)   region C
D)   region D
E)   region EF) All of the above
G) B) and C)

Question 9

Refer to the following graph to answer the following questions: 
-Assuming the figure represents the market for loanable funds,which of the following would represent a decrease in time preferences (i.e.,people are more patient) ?

Accepted Answer

A)   a shift from line 1 to line 4
B)   a shift from line 4 to line 1
C)   a shift from line 2 to line 3
D)   movement from A to B
E)   a new shortage of loanable funds represented by the distance from C to DF) D) and E)
G) A) and C)

Question 10

Typically a college degree is "worth it," but it requires

Accepted Answer

A)   high time preferences.
B)   low time preferences.
C)   smoothed consumption.
D)   variable correlated consumption.
E)   the supply of loanable funds to be large.F) B) and D)
G) B) and C)

Question 11

List the factors of demand for loanable funds,and explain what would cause each of them to shift the demand curve rightward.

Accepted Answer

The factors of demand for loanable funds...

Question 12

Explain why,although both young adults and the elderly typically spend more than they earn,it makes sense that young people would engage in borrowing while the elderly would engage in dissaving.

Accepted Answer

Young adults have not yet accumulated sa...

Question 13

The nominal interest rate is

Accepted Answer

A)   the rate of interest charged to most large commercial borrowers.
B)   equal to the real interest rate minus the inflation rate.
C)   the rate charged on loans for automobiles and other personal loans but not the rate charged on home loans.
D)   the interest rate that is not corrected for inflation.
E)   the interest rate that is corrected for inflation.F) C) and E)
G) None of the above

Question 14

A bond is an instrument that allows the bearer to earn interest.The bearer would be best described as

Accepted Answer

A)   a demander of loanable funds.
B)   a supplier of loanable funds.
C)   a financial intermediary.
D)   one who borrows.
E)   both a financial intermediary and a borrower.F) None of the above
G) C) and D)

Question 15

Time preferences mean

Accepted Answer

A)   people prefer to have more free time rather than less.
B)   people prefer to have less free time (work more) rather than more (being unemployed) .
C)   interest rates are higher for long-term loans than for short-term loans.
D)   people prefer goods sooner rather than later.
E)   people prefer goods later rather than sooner (save the best for last) .F) A) and B)
G) C) and E)

Question 16

Which event could be expected to shift a nation's demand for loanable funds,as shown in the accompanying graph?

Accepted Answer

A)   an increase in the productivity of capital
B)   a decrease in investor confidence
C)   a decrease in consumer wealth
D)   an increase in time preferences
E)   a drop in the number of retired workersF) A) and B)
G) A) and C)

Question 17

Arguably,interest represents

Accepted Answer

A)   both a cost to lenders and a reward to borrowers.
B)   both a cost to borrowers and a return to savers.
C)   the price of later availability (in terms of accrued interest) and a cost to borrowers.
D)   the payment to the land factor of production and a return to savers.
E)   the optimal rate of investment in depreciating assets and the price of earlier availability.F) B) and E)
G) A) and B)

Question 18

Which combination of events could have caused the equilibrium interest rate to rise and the equilibrium quantity of loanable funds (both borrowed and lent) to fall?

Accepted Answer

A)   A baby boom begins,and investor confidence falls.
B)   A baby boom begins,and investor confidence rises.
C)   People have lower time preferences,and governments run larger deficits.
D)   People have lower time preferences,and capital is more productive.
E)   A baby boom begins,and people have higher time preferences.F) A) and E)
G) B) and C)

Question 19

"Firms borrow to fund an investment if and only if the expected return on the investment is greater than the interest rate on the loan." Explain this statement.

Accepted Answer

A firm borrows money in order to invest ...

Question 20

Refer to the following graph to answer the following questions: 
-In the figure,line 1 represents ________,line 2 represents ________,and 5 percent represents ________.

Accepted Answer

A)   savings; the supply of loanable funds; a surplus of loanable funds
B)   savings; the demand for loanable funds; the equilibrium interest rate
C)   investment; the supply of loanable funds; a shortage of loanable funds
D)   investment; the demand for loanable funds; the equilibrium interest rate
E)   foreign savings; the supply of loanable funds; a surplus of loanable fundsF) A) and B)
G) B) and E)

Exam 22: Savings,interest Rates,and the Market for Loanable Funds

"Firms borrow to fund an investment if and only if the expected return on the investment is greater than the interest rate on the loan." Explain this statement.

Correct AnswerverifiedA firm borrows money in order to invest ...View AnswerShow Answer

Which combination of events could have caused the equilibrium interest rate to rise and the equilibrium quantity of loanable funds (both borrowed and lent) to fall?

Correct AnswerverifiedShow Answer

Time preferences mean

Correct AnswerverifiedShow Answer

Refer to the following graph that describes income and consumption patterns over a typical life cycle to answer the following questions: -Which part of the accompanying graph depicts borrowing?

Correct AnswerverifiedShow Answer

Savings is the

Correct AnswerverifiedShow Answer

List the factors of demand for loanable funds,and explain what would cause each of them to shift the demand curve rightward.

Correct AnswerverifiedThe factors of demand for loanable funds...View AnswerShow Answer

Refer to the following graph to answer the following questions: -In the figure,line 1 represents ________,line 2 represents ________,and 5 percent represents ________.

Correct AnswerverifiedShow Answer

Smiley Myrus owns a large corporation that is building a new shopping mall in Winston-Salem, North Carolina.In all likelihood Smiley's firm

Correct AnswerverifiedShow Answer

A bond is an instrument that allows the bearer to earn interest.The bearer would be best described as

Correct AnswerverifiedShow Answer

Which event could be expected to shift a nation's supply of loanable funds,as shown?

Correct AnswerverifiedShow Answer

Arguably,interest represents

Correct AnswerverifiedShow Answer

Those with the least patience

Correct AnswerverifiedShow Answer

Refer to the following graph to answer the following questions: -Assuming the figure represents the market for loanable funds,which of the following would represent a general economic collapse in the United States,causing foreigners to become fearful about the U.S.economy?

Correct AnswerverifiedShow Answer

Assume deflation is occurring in a nation; the implication(s)

Correct AnswerverifiedShow Answer

Which event could be expected to shift a nation's demand for loanable funds,as shown in the accompanying graph?

Correct AnswerverifiedShow Answer

Explain why,although both young adults and the elderly typically spend more than they earn,it makes sense that young people would engage in borrowing while the elderly would engage in dissaving.

Correct AnswerverifiedYoung adults have not yet accumulated sa...View AnswerShow Answer

Typically a college degree is "worth it," but it requires

Correct AnswerverifiedShow Answer

Refer to the following graph to answer the following questions: -Assuming the figure represents the market for loanable funds,which of the following would represent a decrease in time preferences (i.e.,people are more patient) ?

Correct AnswerverifiedShow Answer

Assume foreign incomes rise.Ceteris paribus (all things equal) ,this would cause

Correct AnswerverifiedShow Answer

The nominal interest rate is

Correct AnswerverifiedShow Answer

Correct Answer
verified
A firm borrows money in order to invest ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The factors of demand for loanable funds...
View Answer

Refer to the following graph to answer the following questions: -In the figure,line 1 represents ,line 2 represents ,and 5 percent represents .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Young adults have not yet accumulated sa...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified