Q&A Hero

Q: If there is no Ricardo-Barro effect, an increase in the government budget surplus will A) decrease the supply of loanable funds. B) raise the real interest rate. C) lower the real interest rate. D) decrease the demand for loanable funds. E) not change the demand for loanable funds, the supply of loanable funds, or the real interest rate.

Q: If there is no Ricardo-Barro effect, a government budget surplus A) increases the supply of loanable funds. B) decreases the supply of loanable funds. C) increases the demand for loanable funds. D) decreases the demand loanable funds. E) has no effect on the demand for loanable funds, the supply of loanable funds, or the real interest rate.

Q: If there is no Ricardo-Barro effect, an increase in the government budget surplus A) decreases private saving. B) increases private saving. C) decreases the supply of loanable funds. D) increases the supply of loanable funds. E) has no effect on the demand for loanable funds, the supply of loanable funds, or the real interest rate.

Q: If there is no Ricardo-Barro effect, the government A) plays no direct role in the loanable funds market because it doesn't affect either the demand for loanable funds or the supply of loanable funds. B) always has negative saving and therefore lowers the real interest rate. C) only affects the demand for loanable funds curve in the loanable funds market. D) increases the supply of loanable funds if it has a budget surplus and shifts the supply of loanable funds curve. E) has no effect because private saving changes to offset the effect that the government's budget deficit or surplus might otherwise have.

Q: Government saving is equal to A) the quantity of investment demanded. B) net taxes minus government expenditures. C) net taxes plus government expenditures. D) private savings minus government expenditures. E) net taxes.

Q: If a government has a budget deficit, it must A) borrow in the loanable funds market. B) increase taxes. C) lower the real interest rate. D) decrease its expenditures. E) decrease taxes.

Q: For a government to add to the supply of loanable funds, it must A) borrow. B) have a budget surplus. C) have a budget deficit. D) raise the real interest rate. E) increase its investment demand.

Q: If expected profit falls, the demand for loanable funds curve shifts ________, and the real interest rate ________. A) rightward; rises B) rightward; falls C) leftward; rises D) leftward; falls E) leftward; does not change

Q: If, at the current interest rate, the quantity of loanable funds supplied is less than the quantity of loanable funds demanded, then A) the supply of loanable funds curve shifts rightward and the real interest rate rises. B) the supply of loanable funds curve shifts leftward and the real interest rate falls. C) the real interest rate falls. D) the real interest rate rises. E) the supply of loanable funds curve shifts leftward and the real interest rate rises.

Q: If the real interest rate falls, there is A) an upward movement along the supply of loanable funds curve. B) a downward movement along the supply of loanable funds curve. C) a rightward shift of the supply curve of loanable funds and no shift in the demand for loanable funds curve. D) a leftward shift of the supply of loanable funds curve and no shift in the demand for loanable funds curve. E) a leftward shift of the supply of loanable funds curve and a rightward shift in the demand for loanable funds curve.

Q: An increase in wealth leads to ________ loanable funds. A) an increase in the supply of B) an increase in the demand for C) a decrease in the supply of D) a decrease in the demand for E) no change in either the supply of loanable funds or the demand for

Q: Other things remaining the same, a ________ in the real interest rate ________ the quantity of saving supplied and ________ the quantity of loanable funds supplied. A) fall; increases; increases B) rise; increases; increases C) fall; increases; decreases D) fall; decreases; increases E) rise; increases; decreases

Q: The demand for loanable funds A) increases in a recession. B) decreases in an expansion. C) increases when firms are optimistic about the profit from investing in capital. D) increases when wealth increases. E) decreases when wealth increases.

Q: If the real interest rate falls, other things being the same, the quantity of loanable funds demanded ________ and the quantity of loanable funds supplied ________. A) increases; decreases B) increases; increases C) decreases; does not change D) does not change; decreases E) decreases; decreases

Q: A decrease in expected profit A) lowers the equilibrium real interest rate. B) raises the equilibrium real interest rate. C) increases the demand for loanable funds. D) decreases the supply of loanable funds. E) increases the supply of loanable funds.

Q: Suppose firms become more optimistic about the economy's ability to avoid a recession and hence the expected profit increases. As a result, the demand for loanable funds curve shifts ________ and the real interest rate ________. A) rightward; rises B) rightward; falls C) leftward; rises D) leftward; falls E) rightward; does not change

Q: Suppose that there is an increase in expected future disposable income and simultaneously an increase in the expected profitability of investment. As a result, the equilibrium real interest rate ________ and the equilibrium quantity of loanable funds ________. A) rises; might increase, decrease, or not change B) rises; increases C) rises; decreases D) falls; might increase, decrease, or not change E) falls; increases

Q: Suppose that there is an increase in disposable income and simultaneously an increase in the expected profitability of investment. As a result, the equilibrium real interest rate ________ and the equilibrium quantity of loanable funds ________. A) rises; increases B) falls; increases C) remains unchanged; increases D) might rise, fall, or remain unchanged; increases E) might rise, fall, or remain unchanged; decreases

Q: The figure above shows the loanable funds market. At an interest rate of A) 4 percent, there is a surplus of loanable funds. B) 4 percent, there is a shortage of loanable funds. C) 8 percent, the quantity of loanable funds supplied is $14 trillion. D) 8 percent, the quantity demanded of loanable funds is $18 trillion. E) 6 percent, savers will exit the market because the reward to saving is too low.

Q: The figure above shows the loanable funds market. At an interest rate of A) 8 percent, there is a surplus of loanable funds. B) 8 percent, the quantity demanded of loanable funds exceeds the quantity supplied. C) 4 percent, the quantity supplied of loanable funds equals $18 trillion. D) 6 percent, the quantity demanded of loanable funds equals $14 trillion. E) 4 percent, there is a surplus of loanable funds.

Q: The figure above shows the loanable funds market. The equilibrium real interest rate is ________ percent, and the equilibrium quantity of loanable funds is ________.A) 4; $1.8 trillionB) 6; $1.6 trillionC) 8; $1.4 trillionD) 4; $1.4 trillionE) 8; $1.8 trillion

Q: The figure above shows the loanable funds market. If the real interest rate is 10 percent, thenA) there is a shortage in the loanable funds market.B) there is a surplus in the loanable funds market.C) the interest rate must increase.D) the government must intervene in order to prevent a credit crisis.E) savers will exit the market because of the high opportunity cost of saving.

Q: The figure above shows the loanable funds market. If the real interest rate is 2 percent, thenA) there will be government intervention in the market to make sure there is no credit crisis.B) there will be a leftward shift in the demand for loanable funds curve.C) there is a surplus in the loanable funds market.D) there is a shortage in the loanable funds marketE) the demand for loanable funds curve will shift rightward.

Q: The figure above shows the loanable funds market. The equilibrium real interest rate is ________, and the equilibrium quantity of loanable funds is ________.A) 6 percent; $2.0 trillionB) 4 percent; $2.5 trillionC) 8 percent; $1.5 trillionD) 0 percent; $3.5 trillionE) 4 percent; $1.5 trillion

Q: When the real interest rate ________ the equilibrium real interest rate, there is a ________ of loanable funds and the real interest rate ________.A) exceeds; surplus ; fallsB) is less than; surplus; risesC) exceeds; shortage; risesD) is less than; shortage; fallsE) exceeds; surplus; rises

Q: At the current interest rate, the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded. Therefore A) the real interest rate is below the equilibrium level. B) the real interest rate is above the equilibrium level. C) equilibrium will not be achieved until something shifts the supply of loanable funds curve leftward. D) equilibrium will not be achieved until something shifts the demand for loanable funds curve rightward. E) equilibrium will not be achieved until something shifts the supply of loanable funds curve rightward.

Q: In the loanable funds market, if the real interest rate is higher than the equilibrium real interest rate, A) there is a shortage of loanable funds. B) there is a surplus of loanable funds. C) there is a surplus of investment. D) the demand for loanable funds curve shifts rightward to restore the equilibrium. E) the demand for loanable funds curve shifts leftward to restore the equilibrium.

Q: The equilibrium real interest rate is 5 percent. If the real interest rate is A) 3 percent, then the supply of loanable funds curve will shift leftward as new savers enter the market. B) 6 percent, the demand for loanable funds curve will shift rightward as firms enter the market to borrow at the lower rate. C) 8 percent, there is a surplus of loanable funds. D) 2 percent, there is a shortage of loanable funds. E) anything other than 5 percent, the supply of loanable funds curve and/or the demand for loanable funds curve will shift to move the real interest rate to 5 percent.

Q: If a surplus of loanable funds exists in the loanable funds market, the real interest rate ________ and the quantity of saving ________. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases E) falls; does not change

Q: When the real interest rate ________ the equilibrium real interest rate, there is a ________ of loanable funds and the real interest rate ________. A) exceeds; surplus; rises B) is less than; surplus; rises C) exceeds; shortage; rises D) is less than; shortage; rises E) is less than; shortage; falls

Q: If the real interest rate is less than the equilibrium real interest rate, there is a ________ of loanable funds, and ________. A) surplus; some borrowers cannot find the funds they want B) shortage; some borrowers cannot find the funds they want C) surplus; borrowers have an easy time finding the funds they want D) shortage; borrowers have an easy time finding the funds they want E) shortage; savers increase their saving supply to restore the equilibrium

Q: In the loanable funds market, a shortage of loanable funds occurs when the A) demand for loanable funds exceeds supply of loanable funds. B) supply of loanable funds exceeds demand for loanable funds. C) quantity of loanable funds supplied exceeds the quantity of loanable funds demanded. D) quantity of loanable funds demanded exceeds the quantity of loanable funds supplied. E) supply of loanable funds curve shifts rightward.

Q: In the figure above, the shift in the supply of loanable funds curve from SLF1 to SLF2 could be the result of A) an increase in the real interest rate. B) a decrease in disposable income. C) an increase in expected rate of profit. D) a decrease in wealth E) an increase in expected future disposable income.

Q: Suppose that the initial supply of loanable funds curve is SLF1. In the figure above, an increase in the real interest rate leads toi. a shift in the supply of loanable funds curve from SLF1 to SLF2.ii. a shift in the supply of loanable funds curve from SLF1 to SLF3.iii. a movement along the supply of loanable funds curve SLF1.iv. no change whatever.A) i onlyB) ii onlyC) iii onlyD) i and iiiE) iv only

Q: A decrease in expected future income leads to aA) rightward shift of the demand for loanable funds curve.B) downward movement along the supply of loanable funds curve.C) rightward shift of the supply of loanable funds curve.D) leftward shift of the supply of loanable funds curve.E) leftward shift of the demand for loanable funds curve.

Q: An increase in people's expected future disposable income ________ saving supply, and the supply of loanable funds curve ________.A) decreases; shifts rightwardB) decreases; shifts leftwardC) increases; shifts rightwardD) increases; shifts leftwardE) does not change; does not shift

Q: When wealth ________, saving supply ________, and the supply of loanable funds curve shifts ________. A) decreases; decreases; leftward B) increases; increases; leftward C) decreases; decreases; rightward D) increases; decreases; leftward E) increases; increases; rightward

Q: An increase in wealth ________ saving supply, and the supply of loanable funds curve ________. A) decreases; shifts rightward B) decreases; shifts leftward C) increases; shifts rightward D) increases; shifts leftward E) does not change; does not shift

Q: A decrease in wealth leads to a A) leftward shift of the demand for loanable funds curve. B) downward movement along the supply of loanable funds curve. C) rightward shift of the supply of loanable funds curve. D) leftward shift of the supply of loanable funds curve. E) rightward shift of the demand for loanable funds curve.

Q: An increase in disposable income leads to a A) leftward shift of the demand for loanable funds curve. B) downward movement along the supply of loanable funds curve. C) rightward shift of the supply of loanable funds curve. D) leftward shift of the supply of loanable funds curve. E) rightward shift of the demand for loanable funds curve.

Q: A decrease in households' disposable income ________ saving supply, and the supply of loanable funds curve ________. A) decreases; shifts rightward B) decreases; shifts leftward C) increases; shifts rightward D) increases; shifts leftward E) does not change; does not shift

Q: In which of the following cases would the supply of loanable funds curve shift rightward? A) Joe is worried about cutbacks at his firm, so his expected future income falls. B) In June, Sally learns that at year's end she will receive a bonus that will double her current salary. C) The stock market booms, so people's wealth increases. D) The economy moves into a recession. E) Investment demand increases.

Q: The supply of loanable funds curve has a ________ slope and the demand for loanable funds curve has a ________ slope. A) positive; positive B) positive; negative C) negative; positive D) negative; negative E) vertical; horizontal

Q: Which of the following factors does NOT shift the supply of loanable funds curve? i. change in disposable income ii. change in wealth iii. change in expected profit A) i only B) ii only C) iii only D) i and ii E) ii and iii

Q: If wealth ________, then saving increases, which is shown by a ________. A) increases; movement upward along the supply of loanable funds curve B) decreases; movement downward along the supply of loanable funds curve C) increases; rightward shift of the supply of loanable funds curve D) decreases; rightward shift of the supply of loanable funds curve E) increases; leftward shift of the supply of loanable funds curve

Q: The supply of loanable funds curve has a positive slope because the A) higher the real interest rate, the lower the return to saving. B) average return in the stock market is directly related to the real interest rate. C) lower the real interest rate, the higher the return to saving. D) lower the real interest rate, the lower the return to saving. E) quantity of investment increases when the real interest rate increases.

Q: If the real interest rate A) rises, the supply of loanable funds curve shifts rightward. B) rises, the supply of loanable funds curve shifts leftward. C) falls, there is a movement along the supply of loanable funds curve to a higher quantity of saving. D) falls, there is a movement along the supply curve of loanable funds to a lower quantity of loanable funds . E) falls, the supply of loanable funds curve shifts leftward.

Q: If the real interest rate rises, then the A) supply of saving increases and the supply of loanable funds curve shifts rightward. B) supply of saving decreases and the supply of loanable funds curve shifts leftward. C) quantity of saving increases and there is a movement up along the supply of loanable funds curve. D) quantity of saving decreases and there is a movement down along the supply of loanable funds curve. E) demand for investment decreases and the demand for loanable funds curve shifts leftward.

Q: A fall in the real interest rate brings a A) movement up along the supply of loanable funds curve. B) rightward shift of the supply of loanable funds curve. C) movement down along the supply of loanable funds curve. D) leftward shift of the supply of loanable funds curve. E) rightward shift of the demand for loanable funds curve.

Q: Which of the following shifts the supply of loanable funds curve? A) change in the real interest rate B) change in investment demand C) change in disposable income D) change in expected profit E) change in "animal spirits"

Q: Which of the following factors changes saving supply and hence shifts the supply of loanable funds curve? i. disposable income ii. wealth iii. expected profit A) i only B) ii only C) iii only D) i and ii E) i, ii, and iii

Q: When ________ changes, the supply of loanable funds curve shifts. A) the expected rate of profit B) people's expected future income C) the price level D) "animal spirits" E) investment

Q: In 2008 the fall in the value of the stock market decreased people's wealth. As a result of this change alone, the supply of loanable funds A) increased. B) did not change, and there was no movement along the supply of loanable funds curve. C) decreased. D) did not change, and there was an upward movement along the supply of loanable funds curve. E) did not change, and there was a downward movement along the supply of loanable funds curve.

Q: If expected future income increases, then A) the supply of loanable funds increases. B) the supply of loanable funds decreases. C) the quantity of loanable funds demanded increases. D) the quantity of loanable funds supplied decreases. E) the demand for loanable funds decreases.

Q: If expectations about future income change, there is A) no change in saving until income actually changes. B) a decrease in saving if people expect income to increase in the future. C) an increase in saving if people expect income to increase in the future. D) a decrease saving if people expect income to decrease in the future. E) a change in the quantity of loanable funds supplied and a movement along the supply of loanable funds curve.

Q: If the disposable income decreases, then A) the supply of loanable funds increases. B) the supply of loanable funds decreases. C) the quantity of loanable funds demanded increases. D) the quantity of loanable funds supplied decreases. E) the demand for loanable funds increases.

Q: When disposable income increases, saving will A) decrease, and there is a movement downward along the supply of loanable funds curve. B) increase, and there is a movement upward along the supply of loanable funds curve. C) not change. D) increase, and the supply of loanable funds curve shifts rightward. E) decrease, and the supply of loanable funds curve shifts leftward.

Q: As the economy enters an expansion so that people's expected future incomes rise, there will be A) an increase in the supply of loanable funds. B) a leftward shift in the supply of loanable funds curve. C) a decrease in the nominal interest rate. D) a leftward shift in the demand for loanable funds curve. E) None of the above answers is correct.

Q: A decrease in people's disposable income A) increases saving. B) increases consumption. C) decreases saving. D) increases saving and decrease consumption. E) increases investment demand.

Q: As the real interest rate rises, the quantity of loanable funds supplied ________ and the quantity of loanable funds demanded ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases E) does not change; does not change

Q: An increase in the real interest rate A) has no effect on the loanable funds. B) increases the quantity of loanable funds supplied. C) increases current consumption. D) decreases the quantity of loanable funds supplied. E) shifts the supply of loanable funds curve rightward.

Q: The supply of loanable funds schedule shows that the A) higher the real interest rate, the greater the quantity of loanable funds supplied. B) higher the real interest rate, the greater the opportunity cost of supplying loanable funds. C) higher the real interest rate, the lower the profit from making new investment. D) lower the real interest rate, the greater the quantity of loanable funds supplied. E) higher the real interest rate, the more the supply of loanable funds curve shifts rightward.

Q: Increasing savings and ________ go hand in hand because they both ________. A) decreasing expenditures; are the result of an increase in real interest rates on the loanable funds market B) decreasing expenditures; are the result of an increase in nominal interest rates on the loanable funds market C) increasing expenditures; are the result of an increase in real interest rates on the loanable funds market D) increasing expenditures; are the result of an increase in nominal interest rates on the loanable funds market E) None of the above answers is correct.

Q: If the interest rate on student loans ________, students will ________. A) rises from 6 percent to 12 percent; increase their saving in order to pay back the loan sooner B) rises from 6 percent to 12 percent; increase their consumption before it becomes too expensive C) falls from 6 percent to 1 percent; increase their saving in order to pay back the loan sooner D) falls from 6 percent to 1 percent; not change their saving but will change their investment E) None of the above answers is correct.

Q: If the real interest rate falls, people decide to ________ because the opportunity cost of ________. A) increase their consumption expenditure; saving has decreased B) increase their consumption expenditure; consumption has decreased C) decrease their consumption expenditure; consumption has decreased D) save more; saving has decreased E) None of the above answers is correct.

Q: The real interest rate is ________ related to the supply of loanable funds because ________. A) positively; the opportunity cost of consumption expenditure increases as the real interest rate rises B) negatively; the opportunity cost of consumption expenditure increases as the real interest rate rises C) positively; people are motivated to increase their consumption expenditure as the real interest rate rises D) negatively; people are motivated to save more as the real interest rate rises E) None of the above answers is correct.

Q: The quantity of loanable funds supplied increases if the ________, all other things remaining the same, because the ________. A) real interest rate rises; real interest rate is the opportunity cost of saving B) real interest rate rises; real interest rate is the opportunity cost of consumption C) real interest rate rises; cost of living is determined by the real interest rate D) real interest rate falls; real interest rate is the opportunity cost of consumption E) real interest rate falls; real interest rate is the opportunity cost of saving

Q: The quantity of loanable funds supplied increases if the real interest rate rises, all other things remaining the same, because the A) real interest rate is the opportunity cost of saving. B) real interest rate is the opportunity cost of consumption. C) cost of living is determined by the real interest rate. D) real interest rate is inversely related to the cost of buying on credit. E) demand for investment increases when the real interest rate rises.

Q: The supply of loanable funds is from A) households and the government if it has a budget surplus. B) households and the government if it has a budget deficit. C) firms and the government if it has a budget surplus. D) firms and the government if it has a budget deficit. E) households and firms.

Q: In the figure above, the leftward shift from the demand for loanable funds curve DLF1 to the demand for loanable funds curve DLF3, could be the result of A) a fall in the interest rate. B) a decrease in expected profit. C) an advancement in technology. D) an increase in the population. E) a rise in the interest rate.

Q: In the figure above, the leftward shift from the demand for loanable funds curve DLF1 to the demand for loanable funds curve DLF3, could be the result of A) a decrease in interest rates during an economic recession. B) an increase in interest rates during an economic expansion. C) the economy entering a recession. D) a government budget surplus. E) the economy entering an expansion.

Q: In the figure above, the shift from DLF1 to DLF2 could result from A) the economy entering a strong expansion. B) an increase in the nominal interest rate. C) a decrease in the real interest rate. D) an increase in a government budget surplus. E) the economy entering a recession.

Q: In the figure above, the rightward shift from the demand for loanable funds curve DLF1 to the demand for loanable funds curve DLF2, could be the result of A) a rise in the interest rate. B) an increase in wealth. C) an increase in expected profit. D) a decrease in expected profit. E) a fall in the interest rate.

Q: If firms became more optimistic about the future of the economy, which of the following occurs?A) Investment demand increases, and the demand for loanable funds curve shifts rightward.B) Investment demand decreases, and the demand for loanable funds curve shifts leftward.C) The quantity of investment demanded increases, and there is a movement down along the demand for loanable funds curve.D) The quantity of investment demanded decreases, and there is a movement up along the demand for loanable funds curve.E) The saving decreases, and the supply of loanable funds curve shifts leftward.

Q: Which of the following occurs if the expected profit increases? A) Investment demand increases and the demand for loanable funds curve shifts rightward. B) Investment demand decreases and the demand for loanable funds curve shifts leftward. C) The quantity of investment demanded increases and there is a movement down along the demand for loanable funds curve. D) The quantity of investment demanded decreases and there is a movement up along the demand for loanable funds curve. E) The savings increases and the supply of loanable funds curve shifts rightward.

Q: An increase in the expected profit from new capital brings about a A) movement up along the demand for loanable funds curve. B) movement down along the demand for loanable funds curve. C) rightward shift of the demand for loanable funds curve. D) leftward shift of the demand for loanable funds curve. E) rightward shift of the supply of loanable funds curve.

Q: When the expected profit ________, investment demand ________ and the demand for loanable funds curve shifts ________. A) falls; decreases; leftward B) rises; increases; leftward C) falls; decreases; rightward D) rises; decreases; rightward E) falls; increases; rightward

Q: The demand for loanable funds curve shifts rightward when A) the real interest rate rises. B) the real interest rate falls. C) expected profit increases. D) expected profit decreases. E) wealth rises.

Q: What happens to the demand for loanable funds curve when the economy enters a recession? A) The demand for loanable funds curve shifts rightward because the real interest rate falls. B) The demand for loanable funds curve shifts leftward because the real interest rate falls. C) The demand for loanable funds curve shifts rightward because expected profit falls. D) The demand for loanable funds curve shifts leftward because expected profit falls. E) The demand for loanable funds curve shifts leftward because wealth decreases.

Q: During a recession, firms' expected profit from investment ________ so the demand for loanable funds curve ________. A) falls; shifts rightward B) falls; shifts leftward C) rises; shifts rightward D) rises; shifts leftward E) falls; does not shift