Question 1

Crowding out results in a(n) :

Accepted Answer

A)   decrease in private investment spending resulting from government deficit spending.
B)   increase in accumulation of physical capital, which leads to higher economic growth.
C)   increase in private investment spending resulting from government deficit spending.
D)   increase in consumption spending as a result of higher investment spending.E) A) and B)
F) All of the above

Question 2

In a simple closed economy, all investment spending must come from:

Accepted Answer

A)   savings.
B)   money creation.
C)   debt issuance.
D)   foreign borrowing.E) B) and C)
F) All of the above

Question 3

Use the following to answer question 
Figure: Market for Loanable Funds I 
-(Figure: Market for Loanable Funds I)  Look at the figure Market for Loanable Funds I. The equilibrium interest rate in the loanable funds market is:

Accepted Answer

A)   2%.
B)   4%.
C)   6%.
D)   8%.E) None of the above
F) A) and D)

Question 4

Given an annual interest rate of 2%, the present value of a future payment of $1,500 to be paid in one year is:

Accepted Answer

A)   $1,250.55.
B)   $1,470.59.
C)   $1,530.
D)   $1,500.E) A) and C)
F) B) and C)

Question 5

Which of the following assets is the MOST liquid?

Accepted Answer

A)   currency
B)   checking account balance
C)   stock in a publicly traded company
D)   a townhouseE) A) and C)
F) B) and D)

Question 6

Use the following to answer question 
Figure: The Market for Loanable Funds with Government Borrowing 
-(Figure: The Market for Loanable Funds with Government Borrowing)  Look at the figure The Market for Loanable Funds with Government Borrowing. After an increase in government borrowing, the new equilibrium interest rate will rise from 6% to _____ and the amount of private savings will _____.

Accepted Answer

A)   10%; stay the same
B)   8%; rise
C)   8%; fall
D)   10%; be indeterminateE) A) and D)
F) A) and C)

Question 7

Which of the following assets is the LEAST liquid?

Accepted Answer

A)   cash
B)   checking account balance
C)   corporate bond
D)   ownership of one fourth of a privately held companyE) None of the above
F) A) and C)

Question 8

Use the following to answer questions 
Figure: The Market for Loanable Funds III 
-(Figure: The Market for Loanable Funds III)  Look at the figure The Market for Loanable Funds III. If the government in a closed economy is running a budget balance of zero when it decides to increase defense spending by $200 billion and then finances the spending by selling bonds, the government will crowd out a maximum of _____ in private investment spending.

Accepted Answer

A)   $200 billion
B)   $100 billion
C)   $50 billion
D)   $10 billionE) A) and B)
F) C) and D)

Question 9

Use the following to answer questions 
Figure: Crowding Out LF1 shifts to SLF2. This shift implies that: A)  private savings has increased. B)  national investment has decreased. C)  private savings has decreased. D)  national savings has decreased." class="answers-bank-image d-inline" rel="preload" >
-(Figure: Crowding Out)  Look at the figure Crowding Out. The supply of loanable funds curve SLF1 shifts to SLF2. This shift implies that:

Accepted Answer

A)   private savings has increased.
B)   national investment has decreased.
C)   private savings has decreased.
D)   national savings has decreased.E) A) and B)
F) C) and D)

Question 10

Which of the following is the most accurate statement?

Accepted Answer

A)   Deficits increase economic growth.
B)   Deficits decrease economic growth.
C)   Deficits do not affect economic growth.
D)   We cannot unambiguously say whether government spending that increases deficits lowers or increases economic growth.E) A) and B)
F) A) and D)

Question 11

A business will want a loan when:

Accepted Answer

A)   interest rate 
B)   rate of return 
C)   rate of return - interest rate 
D)   rate of return > (cost of project - interest rate)  / interest rate × 100.E) None of the above
F) A) and B)

Question 12

The market for loanable funds is in equilibrium. All else equal, the federal government has eliminated taxes on interest earned from savings. Describe how this will affect the market for loanable funds, the equilibrium interest rate, and the equilibrium quantity of loanable funds.

Accepted Answer

If households are no longer taxed on inc...

Question 13

In a closed economy, national savings equals:

Accepted Answer

A)   (disposable income minus consumption spending)  minus (tax receipts minus government spending) .
B)   (disposable income minus consumption spending)  plus (government spending minus tax receipts) .
C)   (disposable income minus consumption spending)  plus (tax receipts minus government spending) .
D)   (consumption spending minus disposable income)  plus (government spending minus tax receipts) .E) None of the above
F) A) and B)

Question 14

Investment spending in macroeconomics refers to:

Accepted Answer

A)   buying stocks.
B)   buying newly issued shares of stock.
C)   adding to physical capital.
D)   adding to one's retirement account.E) None of the above
F) A) and C)

Question 15

Use the following to answer questions 
Figure: The Market for Loanable Funds II 
-(Figure: The Market for Loanable Funds II)  Look at the figure The Market for Loanable Funds II. Other things being equal, if there is an increase in the interest rate above 8%, _____ quantity of loanable funds will be demanded.

Accepted Answer

A)   the same
B)   a larger
C)   a smaller
D)   at first a smaller and then a largerE) A) and B)
F) None of the above

Question 16

Use the following to answer questions 
Figure: Loanable Funds 
-(Figure: Loanable Funds)  Look at the figure Loanable Funds. Which of the following might produce a new equilibrium interest rate of 5% and a new equilibrium quantity of loanable funds of $150 billion?

Accepted Answer

A)   Consumption as a fraction of disposable income increases.
B)   Businesses become more optimistic about the return on investment spending.
C)   The federal government has a budget surplus rather than a budget deficit.
D)   There is an increase in capital inflows from other nations.E) A) and C)
F) A) and B)

Question 17

A budget deficit occurs when tax revenue is higher than government spending plus government transfers.

Accepted Answer

A) True 
 B)False

Question 18

An asset that can be quickly converted to cash with relatively little loss of value is:

Accepted Answer

A)   illiquid.
B)   liquid.
C)   diversified.
D)   risk averse.E) B) and C)
F) All of the above

Question 19

A bond is a financial asset that pays a fixed amount of interest each year and then repays the principal on a given date.

Accepted Answer

A) True 
 B)False

Question 20

When a corporation borrows money from lenders in exchange for a fixed rate of return and a given maturity, the corporation is:

Accepted Answer

A)   taking out a loan.
B)   issuing bonds.
C)   issuing stocks.
D)   liquidating a bank deposit.E) None of the above
F) All of the above

Exam 24: Savings, Investment Spending

A budget deficit occurs when tax revenue is higher than government spending plus government transfers.

Correct Answer
verified

Correct Answer
verified

In a closed economy, national savings equals:

Correct Answer
verified

Correct Answer
verified

In a simple closed economy, all investment spending must come from:

Correct Answer
verified

The market for loanable funds is in equilibrium. All else equal, the federal government has eliminated taxes on interest earned from savings. Describe how this will affect the market for loanable funds, the equilibrium interest rate, and the equilibrium quantity of loanable funds.

Correct Answer
verified
If households are no longer taxed on inc...
View Answer

An asset that can be quickly converted to cash with relatively little loss of value is:

Correct Answer
verified

Use the following to answer questions Figure: Crowding Out -(Figure: Crowding Out) Look at the figure Crowding Out. The supply of loanable funds curve S_LF₁ shifts to S_LF₂. This shift implies that:

Correct Answer
verified

Given an annual interest rate of 2%, the present value of a future payment of $1,500 to be paid in one year is:

Correct Answer
verified

Which of the following is the most accurate statement?

Correct Answer
verified

Correct Answer
verified

Which of the following assets is the MOST liquid?

Correct Answer
verified

Use the following to answer question Figure: Market for Loanable Funds I -(Figure: Market for Loanable Funds I) Look at the figure Market for Loanable Funds I. The equilibrium interest rate in the loanable funds market is:

Correct Answer
verified

Which of the following assets is the LEAST liquid?

Correct Answer
verified

A business will want a loan when:

Correct Answer
verified

Crowding out results in a(n) :

Correct Answer
verified

When a corporation borrows money from lenders in exchange for a fixed rate of return and a given maturity, the corporation is:

Correct Answer
verified

Investment spending in macroeconomics refers to:

Correct Answer
verified

A bond is a financial asset that pays a fixed amount of interest each year and then repays the principal on a given date.

Correct Answer
verified

Correct Answer
verified

Exam 24: Savings, Investment Spending

A budget deficit occurs when tax revenue is higher than government spending plus government transfers.

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: Loanable Funds -(Figure: Loanable Funds) Look at the figure Loanable Funds. Which of the following might produce a new equilibrium interest rate of 5% and a new equilibrium quantity of loanable funds of $150 billion?

Correct AnswerverifiedShow Answer

In a closed economy, national savings equals:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a simple closed economy, all investment spending must come from:

Correct AnswerverifiedShow Answer

The market for loanable funds is in equilibrium. All else equal, the federal government has eliminated taxes on interest earned from savings. Describe how this will affect the market for loanable funds, the equilibrium interest rate, and the equilibrium quantity of loanable funds.

Correct AnswerverifiedIf households are no longer taxed on inc...View AnswerShow Answer

An asset that can be quickly converted to cash with relatively little loss of value is:

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: Crowding Out -(Figure: Crowding Out) Look at the figure Crowding Out. The supply of loanable funds curve SLF1 shifts to SLF2. This shift implies that:

Correct AnswerverifiedShow Answer

Given an annual interest rate of 2%, the present value of a future payment of $1,500 to be paid in one year is:

Correct AnswerverifiedShow Answer

Which of the following is the most accurate statement?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following assets is the MOST liquid?

Correct AnswerverifiedShow Answer

Use the following to answer question Figure: Market for Loanable Funds I -(Figure: Market for Loanable Funds I) Look at the figure Market for Loanable Funds I. The equilibrium interest rate in the loanable funds market is:

Correct AnswerverifiedShow Answer

Which of the following assets is the LEAST liquid?

Correct AnswerverifiedShow Answer

A business will want a loan when:

Correct AnswerverifiedShow Answer

Crowding out results in a(n) :

Correct AnswerverifiedShow Answer

When a corporation borrows money from lenders in exchange for a fixed rate of return and a given maturity, the corporation is:

Correct AnswerverifiedShow Answer

Investment spending in macroeconomics refers to:

Correct AnswerverifiedShow Answer

A bond is a financial asset that pays a fixed amount of interest each year and then repays the principal on a given date.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If households are no longer taxed on inc...
View Answer

Correct Answer
verified

Use the following to answer questions Figure: Crowding Out -(Figure: Crowding Out) Look at the figure Crowding Out. The supply of loanable funds curve S_LF₁ shifts to S_LF₂. This shift implies that:

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified