Question 1

A policy that induces people to save more shifts

Accepted Answer

A)   the supply of loanable funds rightward and increases investment.
B)   the supply of loanable funds leftward and decreases investment.
C)   the supply of loanable funds rightward and decreases investment.
D)   the supply of loanable funds leftward and increases investment.E) A) and C)
F) None of the above

Question 2

In a closed economy, if Y remained the same, but G rose, T rose by the same amount as G, and C fell but by less than the increase in T, what would happen to private and national saving?

Accepted Answer

A)   national saving would fall and private saving would rise
B)   national saving would rise and private saving would fall
C)   both national saving and private saving would fall
D)   None of the above is correct.E) C) and D)
F) B) and C)

Question 3

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium.
 
-Refer to Table 26-3. Determine the quantity of private saving.

Accepted Answer

A)   $0.2 trillion
B)   $1.6 trillion
C)   $1.8 trillion
D)   $2.6 trillionE) B) and C)
F) A) and D)

Question 4

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

Accepted Answer

The supply of loanable funds w...

Question 5

In a closed economy, if Y, C, and T remained the same, a decrease in G would

Accepted Answer

A)   reduce private saving and public saving.
B)   increase private saving but not public saving.
C)   increase public saving but not private saving.
D)   increase neither private nor public saving.E) C) and D)
F) B) and C)

Question 6

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

Accepted Answer

A) True 
 B)False

Question 7

An increase in the demand for loanable funds increases the equilibrium interest rate and decreases the equilibrium level of saving.

Accepted Answer

A) True 
 B)False

Question 8

If a reform of the tax laws encourages greater saving, the result would be

Accepted Answer

A)   higher interest rates and greater investment.
B)   higher interest rates and less investment.
C)   lower interest rates and greater investment.
D)   lower interest rate and less investment.E) C) and D)
F) A) and C)

Question 9

When the government runs a budget deficit,

Accepted Answer

A)   interest rates are lower than they would be if the budget were balanced.
B)   national saving is higher than it would be if the budget were balanced.
C)   investment is lower than it would be if the budget were balanced.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 10

A government budget deficit affects the supply of loanable funds, rather than the demand for loanable funds, because

Accepted Answer

A)   in our model of the loanable funds market, we define "loanable funds" as the flow of resources available to fund private investment.
B)   in our model of the loanable funds market, we define "loanable funds" as the flow of resources available from private saving.
C)   markets for government debt are fundamentally different from markets for private debt.
D)   of our assumption that the economy is closed.E) A) and D)
F) B) and C)

Question 11

If the nominal interest rate is 3 percent and the inflation rate is 4 percent, then the real interest rate is

Accepted Answer

A)   7 percent.
B)   -1 percent.
C)   3 percent.
D)   4 percent.E) B) and C)
F) B) and D)

Question 12

A higher interest rate makes more attractive. Therefore the quantity of loanable funds supplied increases.

Accepted Answer

The answer of A higher interest rate makes more attractive....

Question 13

If Congress instituted an investment tax credit, the interest rate would

Accepted Answer

A)   rise and saving would rise.
B)   fall and saving would fall.
C)   rise and saving would fall.
D)   fall and saving would rise.E) B) and D)
F) B) and C)

Question 14

Other things the same, an increase in the interest rate

Accepted Answer

A)   would shift the demand for loanable funds to the right.
B)   would shift the demand for loanable funds to the left.
C)   would increase the quantity of loanable funds demanded.
D)   would decrease the quantity of loanable funds demanded.E) B) and C)
F) C) and D)

Question 15

Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment.

Accepted Answer

A) True 
 B)False

Question 16

Other things the same, corporate bonds generally feature higher interest rates than U.S. government bonds.

Accepted Answer

A) True 
 B)False

Question 17

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. 
-Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Accepted Answer

A)   The government goes from running a budget deficit to running a budget surplus.
B)   Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories.
C)   A change in the tax laws encourages people to consume less and save more.
D)   A change in the tax laws encourages people to consume more and save less.E) B) and D)
F) B) and C)

Question 18

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

Accepted Answer

A)   Interest rates would rise.
B)   Interest rates would be unaffected.
C)   Interest rates would fall.
D)   The effect on the interest rate is uncertain.E) All of the above
F) None of the above

Question 19

Public saving is equal to national saving minus private saving.

Accepted Answer

A) True 
 B)False

Question 20

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 26-3. Which of the following movements shows the effects of households' decision to save more?

Accepted Answer

A)   a movement from Point A to Point B
B)   a movement from Point F to Point A
C)   a movement from Point C to Point F
D)   a movement from Point B to Point CE) B) and D)
F) C) and D)

Exam 8: Saving, Investment, and the Financial System

If Congress instituted an investment tax credit, the interest rate would

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A higher interest rate makes more attractive. Therefore the quantity of loanable funds supplied increases.

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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. Which of the following movements shows the effects of households' decision to save more?

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Other things the same, corporate bonds generally feature higher interest rates than U.S. government bonds.

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An increase in the demand for loanable funds increases the equilibrium interest rate and decreases the equilibrium level of saving.

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Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. -Refer to Table 26-3. Determine the quantity of private saving.

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Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment.

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If the nominal interest rate is 3 percent and the inflation rate is 4 percent, then the real interest rate is

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A policy that induces people to save more shifts

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

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In a closed economy, if Y remained the same, but G rose, T rose by the same amount as G, and C fell but by less than the increase in T, what would happen to private and national saving?

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If a reform of the tax laws encourages greater saving, the result would be

Correct AnswerverifiedShow Answer

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

Correct AnswerverifiedThe supply of loanable funds w...View AnswerShow Answer

Public saving is equal to national saving minus private saving.

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In a closed economy, if Y, C, and T remained the same, a decrease in G would

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Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. -Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

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Other things the same, an increase in the interest rate

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A government budget deficit affects the supply of loanable funds, rather than the demand for loanable funds, because

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In a closed economy, if taxes fall and consumption rises, then private saving must fall.

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When the government runs a budget deficit,

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The supply of loanable funds w...
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