Question 1

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 $56 billion and if the rate of inflation is 4 percent,then the equilibrium real interest rate is

Accepted Answer

A)  lower than 6 percent.
B)  6 percent.
C)  between 6 percent and 8 percent.
D)  higher than 8 percent.E) All of the above
F) A) and B)

Question 2

Other things the same,if the government decreases transfer payments,then

Accepted Answer

A)  both the interest rate and the equilibrium quantity of loanable funds fall.
B)  both the interest rate and the equilibrium quantity of loanable funds rise.
C)  the interest rate rises and the equilibrium quantity of loanable funds falls.
D)  the interest rate falls and the equilibrium quantity of loanable funds rises.E) A) and B)
F) A) and C)

Question 3

A _____ does not engage in international trade in goods and services and it does not engage in international borrowing and lending.

Accepted Answer

The answer of A _____ does not engage in international...

Question 4

Other things the same,the effects of an increase in transfer payments on the government's budget deficit will lead to

Accepted Answer

A)  greater investment.
B)  a higher interest rate.
C)  higher public saving.
D)  All of the above are correct.E) C) and D)
F) A) and B)

Question 5

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.What is measured along the horizontal axis of the graph?

Accepted Answer

A)  the quantity of loanable funds
B)  the size of the government budget deficit or surplus
C)  the real interest rate
D)  the nominal interest rateE) C) and D)
F) A) and C)

Question 6

Figure 26-5.Figure 26-5 shows the loanable funds market for a closed economy. 
-Refer to Figure 26-5.Starting at point A,a change in tax laws that encouraged households to save more would likely cause

Accepted Answer

A)  the quantity of loanable funds traded to increase to $125 and the interest rate fall to 5% (point 
D)  .
B)  the quantity of loanable funds traded to increase to $125 and the interest rate to rise to 7% (point 
C)  .
C)  the quantity of loanable funds traded to decrease to $75 and the interest rate to fall to 5% (point 
B)  .
D)  the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to 7% (point 
E)  .E) A) and C)
F) C) and D)

Question 7

Robert buys bonds.Rachel buys a new truck for her landscaping business.Identify both as savers,investors,both,or neither.

Accepted Answer

Robert is ...

Question 8

Figure 26-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. 1 to D2 ? A) The tax code is reformed to encourage greater saving. B) The tax code is reformed to encourage greater investment. C) The government starts running a budget deficit. D) The government starts running a budget surplus." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 26-4.Which of the following events could explain a shift of the demand-for-loanable-funds curve from
 D1 to D2 ?

Accepted Answer

A)  The tax code is reformed to encourage greater saving.
B)  The tax code is reformed to encourage greater investment.
C)  The government starts running a budget deficit.
D)  The government starts running a budget surplus.E) C) and D)
F) A) and D)

Question 9

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

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) None of the above
F) B) and D)

Question 10

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

Accepted Answer

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

Question 11

Bond A and Bond B have identical characteristics except that Bond A has a higher interest rate.Which bond has a higher credit risk?

Accepted Answer

The answer of Bond A and Bond B have identical...

Question 12

Other things the same,an increase in the budget deficit

Accepted Answer

A)  shifts the demand for loanable funds right,so the interest rate rises.
B)  shifts the demand for loanable funds left,so the interest rate falls.
C)  shifts the supply of loanable funds right,so the interest rate falls.
D)  shifts the supply of loanable funds left,so the interest rate rises.E) None of the above
F) All of the above

Question 13

When someone borrows to purchase capital goods, he is using someone else’s _____ to fund his _____.

Accepted Answer

The answer of When someone borrows to purchase capital goods,...

Question 14

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

Accepted Answer

A)  there is a surplus so interest rates will rise.
B)  there is a surplus so interest rates will fall.
C)  there is a shortage so interest rates will rise.
D)  there is a shortage so interest rates will fall.E) B) and C)
F) A) and D)

Question 15

Other things the same,if the government increases transfer payments to households,then the effect of this on the government's budget

Accepted Answer

A)  will make investment rise.
B)  will make the rate of interest rise.
C)  will make public saving rise.
D)  All of the above are correct.E) All of the above
F) A) and D)

Question 16

When the government goes from running a balanced budget to running a budget surplus,

Accepted Answer

A)  national saving decreases,the interest rate rises,and the economy's long-run growth rate is likely to decrease.
B)  national saving increases,the interest rate falls,and the economy's long-run growth rate is likely to decrease.
C)  national saving decreases,the interest rate rises,and the economy's long-run growth rate is likely to increase.
D)  national saving increases,the interest rate falls,and the economy's long-run growth rate is likely to increase.E) B) and D)
F) None of the above

Question 17

Which of the following events could explain a decrease in interest rates together with an increase in investment?

Accepted Answer

A)  The government went from surplus to deficit.
B)  The government instituted an investment tax credit.
C)  The government reduced the tax rate on savings.
D)  None of the above is correct.E) B) and D)
F) B) and C)

Question 18

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit.What would happen to the interest rate?

Accepted Answer

A)  It would decrease.
B)  It would increase.
C)  It would stay the same.
D)  It might do any of the above.E) A) and C)
F) A) and B)

Question 19

The source of the supply of loanable funds

Accepted Answer

A)  is saving and the source of demand for loanable funds is investment.
B)  is investment and the source of demand for loanable funds is saving.
C)  and the demand for loanable funds is saving.
D)  and the demand for loanable funds is investment.E) All of the above
F) B) and C)

Question 20

A decrease in government spending and the enactment of an investment tax credit would definitely cause

Accepted Answer

A)  the quantity of loanable funds traded to increase.
B)  the interest rate to increase.
C)  the quantity of loanable funds traded to decrease.
D)  the interest rate to decrease.E) A) and B)
F) A) and C)

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 increase the tax on interest income?

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Figure 26-5.Figure 26-5 shows the loanable funds market for a closed economy. -Refer to Figure 26-5.Starting at point A,a change in tax laws that encouraged households to save more would likely cause

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Other things the same,if the government increases transfer payments to households,then the effect of this on the government's budget

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Which of the following events could explain a decrease in interest rates together with an increase in investment?

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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.What is measured along the horizontal axis of the graph?

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A _____ does not engage in international trade in goods and services and it does not engage in international borrowing and lending.

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Other things the same,an increase in the budget deficit

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Robert buys bonds.Rachel buys a new truck for her landscaping business.Identify both as savers,investors,both,or neither.

Correct AnswerverifiedRobert is ...View AnswerShow Answer

A decrease in government spending and the enactment of an investment tax credit would definitely cause

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Bond A and Bond B have identical characteristics except that Bond A has a higher interest rate.Which bond has a higher credit risk?

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The source of the supply of loanable funds

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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.Which of the following events could explain a shift of the demand-for-loanable-funds curve from D1 to D2 ?

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When someone borrows to purchase capital goods, he is using someone else’s _____ to fund his _____.

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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 $56 billion and if the rate of inflation is 4 percent,then the equilibrium real interest rate is

Correct AnswerverifiedShow Answer

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit.What would happen to the interest rate?

Correct AnswerverifiedShow Answer

Other things the same,the effects of an increase in transfer payments on the government's budget deficit will lead to

Correct AnswerverifiedShow Answer

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

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

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When the government goes from running a balanced budget to running a budget surplus,

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Other things the same,if the government decreases transfer payments,then

Correct AnswerverifiedShow Answer

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Robert is ...
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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.Which of the following events could explain a shift of the demand-for-loanable-funds curve from D₁ to D₂ ?

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When someone borrows to purchase capital goods, he is using someone else’s _ to fund his _.

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