Question 1

The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received.

Accepted Answer

A) True 
 B)False

Question 2

The supply of loanable funds is perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 3

Economic profit is most closely associated with:

Accepted Answer

A)   the process of saving and investing.
B)   monopoly,innovation,and uninsurable risks.
C)   long-run competitive equilibrium.
D)   a static economy.E) A) and B)
F) B) and C)

Question 4

The economist who advocated a single tax on land was:

Accepted Answer

A)   Adam Smith.
B)   John Maynard Keynes.
C)   Henry George.
D)   Milton Friedman.E) B) and C)
F) A) and D)

Question 5

If Congress were to pass a law exempting interest on saving from taxation,the:

Accepted Answer

A)   supply of loanable funds would decrease and the equilibrium interest rate rise.
B)   supply of loanable funds would increase and the equilibrium interest rate fall.
C)   demand for loanable funds would increase and the equilibrium interest rate rise.
D)   equilibrium interest rate would be unaffected.E) None of the above
F) B) and C)

Question 6

Other things equal,an increase in the productivity of capital goods will:

Accepted Answer

A)   increase the demand for loanable funds and decrease the equilibrium interest rate.
B)   increase the demand for loanable funds and increase the equilibrium interest rate.
C)   increase the supply of loanable funds and decrease the equilibrium interest rate.
D)   increase the supply of loanable funds and increase the equilibrium interest rate.E) All of the above
F) C) and D)

Question 7

Defined narrowly as wages and salaries,labor's share of the national income is about:

Accepted Answer

A)   70 percent.
B)   53 percent.
C)   42 percent.
D)   89 percent.E) None of the above
F) B) and D)

Question 8

(Consider This) The story about economist Irving Fisher's conversation with his masseuse illustrates that interest payments arise because of:

Accepted Answer

A)   the possibility of inflation.
B)   the reality of credit risk.
C)   imperfect information about the future.
D)   the time-value of money.E) A) and C)
F) A) and B)

Question 9

Which of the following is not a component of the demand for loanable funds?

Accepted Answer

A)   Household purchases of housing and durable consumer goods.
B)   Business purchases of capital goods.
C)   Government financing of the public debt.
D)   Household saving.E) B) and C)
F) All of the above

Question 10

The value today of a specific sum of money to be received in the future is referred to as:

Accepted Answer

A)   the future value of that sum of money.
B)   the present value of that sum of money.
C)   compound interest.
D)   the time-value of money.E) All of the above
F) A) and C)

Question 11

Demand is the active and supply the passive determinant of land rent.

Accepted Answer

A) True 
 B)False

Question 12

The demand for loanable funds is downsloping:

Accepted Answer

A)   because businesses find that more investments are profitable at low interest rates than at high interest rates.
B)   because households are willing to save more at high interest rates than at low interest rates.
C)   only when the nominal interest rate exceeds the real interest rate.
D)   because the amount of profitable business investment varies directly with the interest rate.E) A) and B)
F) A) and C)

Question 13

Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan.The interest rates on the two loans are:

Accepted Answer

A)   14 percent and 20 percent,respectively.
B)   14 percent on both loans.
C)   18.8 percent on both loans.
D)   1.4 percent and 11.8 percent,respectively.E) B) and C)
F) A) and B)

Question 14

Which of the following represents an uninsurable risk to a business firm?

Accepted Answer

A)   The possibility that its warehouse will burn down.
B)   The possibility that several of its workers will be injured at work.
C)   The possibility that an adverse change in consumer tastes will decrease the demand for the firm's product.
D)   The possibility that a tornado will damage the plant and stop production for a month.E) All of the above
F) C) and D)

Question 15

The demand for farmland will increase if:

Accepted Answer

A)   the demand for food decreases.
B)   technological advances make land more productive.
C)   the price of farm labor increases and the output effect exceeds the substitution effect.
D)   the supply of farmland increases.E) A) and B)
F) B) and C)

Question 16

Interest is the:

Accepted Answer

A)   price paid for the use of money.
B)   opportunity cost of time.
C)   expectation of a future return on investment.
D)   reward for consuming rather than saving.E) A) and C)
F) A) and D)

Question 17

The XYZ Corporation can make a real (inflation-adjusted) return on an investment of 9 percent.The nominal rate of interest is 13 percent and the rate of inflation is 7 percent.We can conclude that the:

Accepted Answer

A)   investment will be profitable.
B)   investment will be unprofitable.
C)   real rate of interest is 4 percent.
D)   real rate of interest is 2 percent.E) All of the above
F) B) and D)

Question 18

For all practical purposes,the supply of land is:

Accepted Answer

A)   almost perfectly inelastic.
B)   negatively sloped.
C)   relatively elastic.
D)   perfectly elastic.E) A) and B)
F) B) and D)

Question 19

Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate.The loan amount is:

Accepted Answer

A)   $400.
B)   $1,600.
C)   $160.
D)   $85.E) C) and D)
F) A) and D)

Question 20

The largest single share of all income earned by Americans consists of:

Accepted Answer

A)   wages and salaries.
B)   interest.
C)   rents.
D)   corporate profits.E) None of the above
F) A) and D)

Exam 17: Rent Interest and Profit

Demand is the active and supply the passive determinant of land rent.

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Which of the following is not a component of the demand for loanable funds?

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The XYZ Corporation can make a real (inflation-adjusted) return on an investment of 9 percent.The nominal rate of interest is 13 percent and the rate of inflation is 7 percent.We can conclude that the:

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The demand for loanable funds is downsloping:

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If Congress were to pass a law exempting interest on saving from taxation,the:

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The demand for farmland will increase if:

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Interest is the:

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The value today of a specific sum of money to be received in the future is referred to as:

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Other things equal,an increase in the productivity of capital goods will:

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The supply of loanable funds is perfectly elastic.

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For all practical purposes,the supply of land is:

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Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate.The loan amount is:

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Defined narrowly as wages and salaries,labor's share of the national income is about:

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(Consider This) The story about economist Irving Fisher's conversation with his masseuse illustrates that interest payments arise because of:

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The economist who advocated a single tax on land was:

Correct AnswerverifiedShow Answer

Economic profit is most closely associated with:

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Which of the following represents an uninsurable risk to a business firm?

Correct AnswerverifiedShow Answer

The largest single share of all income earned by Americans consists of:

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The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received.

Correct AnswerverifiedShow Answer

Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan.The interest rates on the two loans are:

Correct AnswerverifiedShow Answer

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