ECON102 Lecture Notes - Lecture 6: Loanable Funds, Nominal Interest Rate, Real Interest Rate
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QUESTION 11
If the demand for investment loans rises, this could be the result of
the discovery of new and better roundabout methods of production. | ||
a lower rate of time preference in society. | ||
a lower interest rate. | ||
a higher interest rate. | ||
a and c |
1 points
QUESTION 12
Which of the following statements is true?
All persons have a high rate of time preference. | ||
People with a high rate of time preference are more likely to be borrowers than people with a low rate of time preference. | ||
People with a high rate of time preference are more likely to be lenders than people with a low rate of time preference. | ||
A high interest rate is the cause of a high rate of time preference. | ||
none of the above |
1 points
QUESTION 13
Which of the following statements is true?
The nominal interest rate is always higher than the real interest rate since the nominal interest rate equals the real interest rate plus the expected inflation rate. | ||
The nominal interest rate is always lower than the real interest rate since the nominal interest rate equals the real interest rate minus the expected inflation rate. | ||
The nominal interest rate can equal the real interest rate, but to do so the expected inflation rate must be zero percent. | ||
It is the nominal interest rate-not the real interest rate-that matters to borrowers. |
1 points
QUESTION 14
If there is an increase in the expected inflation rate, then,
the supply and demand for loanable funds will decrease. | ||
the supply and demand for loanable funds will increase. | ||
the supply of loanable funds will decrease, and the demand for loanable funds will increase. | ||
the supply of loanable funds will increase, and the demand for loanable funds will decrease. |
1 points
QUESTION 15
If suddenly a 4 percent inflation rate (instead of a zero percent inflation rate) is expected by both suppliers and demanders in the loanable funds market, then
the demand for loanable funds curve will shift rightward, and the supply of loanable funds curve will shift leftward. | ||
the demand for loanable funds curve will shift leftward, and the supply of loanable funds curve will shift rightward. | ||
both the demand for loanable funds curve and the supply of loanable funds curve will shift leftward. | ||
both the demand for loanable funds curve and the supply of loanable funds curve will shift rightward. |
QUESTION 16
Which of the following statements is true?
The administrative costs per dollar are greater for a large loan than a small loan. | ||
The risk on a long-term loan is likely to be less than on a short-term loan, ceteris paribus. | ||
a and b | ||
none of the above |
1 points
QUESTION 17
If the price for loanable funds is less than the return on capital, then firms will
borrow in the loanable funds market and invest in capital goods, and as this happens, the quantity of capital decreases and its return rises. | ||
borrow in the loanable funds market and invest in capital goods, and as this happens, the quantity of capital increases and its return falls. | ||
not borrow in the loanable funds market, and over time the capital stock will decrease and the return on capital will fall. | ||
not borrow in the loanable funds market, and over time the capital stock will decrease and the return on capital will rise. |
1 points
QUESTION 18
Economic rent is
the payment a renter pays his or her landlord. | ||
payment in excess of fixed costs. | ||
payment in excess of opportunity costs. | ||
the same as interest if we are discussing a capital good purchase. | ||
none of the above |
1 points
QUESTION 19
Suppose a bank makes a $1,000 loan to you at 5 percent interest when the expected and actual inflation rate are zero percent. Before you pay back the $1,000 principal and $50 interest, the inflation rate increases to 10 percent. Does anyone lose from this situation?
Nobody loses, because the terms were set before the inflation rate increased, and once the terms are set, inflation does not affect the situation. | ||
You lose, because the dollars that you have borrowed are worth more the higher the inflation rate. | ||
The banker loses, because you will be paying back the loan with dollars that are worth less than the dollars you borrowed. | ||
Both the banker and you lose, for the reasons in answers b and c. | ||
There is not enough information to answer the question. |
1 points
QUESTION 20
A change in the expected rate of inflation from 5 percent to 3 percent will
decrease the real interest rate by 2 percentage points. | ||
decrease the real interest rate by 3 percentage points. | ||
increase the nominal interest rate by 2 percentage points. | ||
decrease the nominal interest rate by 2 percentage points. |