ECON 1012 Lecture Notes - Lecture 6: Credit Risk, Government Budget Balance, Disposable And Discretionary Income
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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. |
Question 1
The higher the capital utilization rate, the greater the depreciation rate.
True |
False |
Question 2
Higher capital utilization rates may raise the user costs of capital because higher utilization rates imply
operating at inconvenient times. |
paying overtime to employees operating the machines. |
operating when complementary services like transporters are unavailable or more expensive. |
All of the above. |
Question 3
If the rental price of capital increase, the capital utilization rate
increases. |
decreases. |
remains the same. |
depends on whether the substitution rate is greater than the income effect |
Question 4
The vacancy rate in the labor market is
the number of job openings divided by the number of unemployed people in the labor force. |
the number of job openings divided by the number of workers in the labor force. |
the ratio of open jobs to filled jobs. |
the ratio of open jobs to the total number of jobs that employers want occupied. |
Question 5
Unemployment can exist in a market clearing model if it takes some search time for workers to find jobs.
True |
False |
Question 6
A decrease in workersâ effective real incomes while they are unemployed will
lower the job finding rate and raise the expected duration of unemployment. |
lower the job finding rate and the expected duration of unemployment. |
raise the job finding rate and lower the expected duration of unemployment. |
raise the job finding rate and the expected duration of unemployment. |
Question 7
In the Barro model, the natural rate of unemployment is
positively related to the job separations rate. |
zero. |
fixed. |
positively related to the job finding rate. |
Question 8
If the interest rate increases, the real demand for money also increases
True |
False |
Question 9
Commodity money is money that has value because
of the intrinsic value of the commodity. |
it is legal tender. |
the government says so. |
All of the above. |
Question 10
High-powered money is
money held by business for investment. |
total currency in circulation plus depository institution deposits at the Fed. |
total currency in circulation. |
government bonds held by the public and depository institutions. |
Question 11
U.S. M1 money includes
currency held by the public. |
checkable deposits. |
travelerâs checks. |
All of the above. |
Question 12
U.S. M2 money includes
currency, time deposits, and government bonds. |
savings deposits, small time deposits, and private bonds. |
checkable deposits, savings deposits, and small time deposits. |
retail money market mutual funds, small time deposits, and government bonds. |
Question
Money is different from other assets like capital and bonds in that
money does not pay interest. |
money has intrinsic value. |
money is a better long term store of value. |
All of the above. |
Question
If a personâs income doubles, we expect their cash holdings to
double |
more than double. |
less than double. |
decrease. |
Question 15
Real money demand does not change when
nominal GDP changes. |
the interest rate changes. |
the price level changes. |
All of the above. |
Question 16
All else constant, the price level rises when the supply of money increases.
True |
False |
Question 17
If the nominal interest rate were to increase, then
money demand decreases and the price level increases. |
money demand increases and the price level decreases. |
the money supply and the price level would increase. |
the money supply and the price level would decrease. |
Question 18
Real money demand is a function of real GDP and the nominal interest rate.
True |
False |
Question 19
The real return on money is zero.
True |
False |
Question 20
If the expected inflation rate is 5% and the unexpected inflation rate is 4%, the actual inflation is
1% |
9% |
-1% |
1.25% |
Question 21
When the rate of growth of money is constant
the inflation rate equals the growth rate of money. |
the nominal interest rate rises. |
real money balances are declining. |
All of the above. |
Question 22
A decrease in the money growth rate in the market clearing model causes
a decrease in the nominal interest rate. |
an increase in money demand. |
a decrease in the price level. |
All of the above. |
Question 23
A decrease in the money growth rate in the market clearing model causes
an increase in the nominal interest rate. |
an increase in money demand. |
an increase in the price level. |
All of the above. |
Question 24
Under price level targeting the money supply becomes
neutral |
endogenous |
exogenous |
predetermined |
Q 25 During a recession, the interest rate falls tending to cause money demand to rise, but is at least partly offset by real GDP falling tending to cause money demand to fall.
True |
False |
QUESTION 1
The demand for oranges increases while the supply decreases. The equilibrium price of oranges ________, and the equilibrium quantity ________.
falls; increases | ||
falls; perhaps changes but we can't say if it increases, decreases, or stays the same | ||
rises; decreases | ||
rises; perhaps changes but we can't say if it increases, decreases, or stays the same |
1 points
QUESTION 2
Assume a competitive market is in equilibrium. There is an increase in demand, but no change in supply. As a result the equilibrium price ________, and the equilibrium quantity is ________.
rises; increases | ||
falls; decreases | ||
falls; does not change | ||
rises; does not change |
1 points
QUESTION 3
Bagels and cream cheese are complementary goods. Suppose that the price for flour, which is used to produce bagels, increases. The equilibrium price of cream cheese ________ and the equilibrium quantity of cream cheese ________.
does not change; does not change | ||
rises; increases | ||
falls; decreases | ||
rises; decreases |
1 points
QUESTION 4
If consumers buy a large number of plug-in electric cars, the equilibrium price of electricity will ________ and the equilibrium quantity of electricity will ________.
rise; increase | ||
rise; decrease | ||
fall; increase | ||
fall; decrease |
1 points
QUESTION 5
Which of the following shifts the supply curve for oranges?
an increase in income for all orange consumers if oranges are a normal good | ||
disastrous weather that destroys about half of this year's orange crop | ||
an increase in the price of bananas, a substitute in consumption for oranges | ||
a newly discovered increase in the nutritional value of oranges |
1 points
QUESTION 6
Which of the following shifts the supply curve of rutabagas rightward? (A rutabaga is a potato-like vegetable.)
normal goods in production. | ||
an exceptionally cold summer that killed much of the rutabaga crop. | ||
a fall in the price of fertilizer used to grow rutabagas. | ||
an increase in the price of a rutabaga |
1 points
QUESTION 7
Suppose over the next several years the productivity of firms producing electric cars improves dramatically. The advance in productivity leads to
an increase in the supply electric cars so that the supply curve shifts rightward. | ||
an increase in the supply of electric cars so that the supply curve shifts leftward. | ||
a decrease in the supply of electric cars so that the supply curve shifts rightward. | ||
a decrease in the supply of electric cars so that the supply curve shifts leftward. |
1 points
QUESTION 8
Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then
the demand for hot dogs will increase. | ||
the demand for hot dog buns will decrease. | ||
the quantity demanded of hotdogs will decrease. | ||
the demand for hot dog buns will increase. |
1 points
QUESTION 9
Demand curves slope ________ because as the price increases and other things remain the same, the quantity demanded ________.
upward; increases | ||
downward; decreases | ||
upward; decreases | ||
downward; increases |
1 points
QUESTION 10
Water bottlers announce that next month the price of bottled water will rise by 25 percent. Which of the following occurs immediately?
The quantity of bottled water demanded increases. | ||
The demand for bottled water increases. | ||
The quantity of bottled water demanded decreases. | ||
The demand for bottled water decreases. |
1 points
QUESTION 11
If the price of carrots is below the equilibrium price, the
quantity supplied of carrots exceeds the quantity demanded and a shortage exists. | ||
quantity demanded of carrots exceeds the quantity supplied and a shortage exists. | ||
quantity supplied of carrots exceeds the quantity demanded and a surplus exists. | ||
quantity demanded of carrots exceeds the quantity supplied and a surplus exists. |
1 points
QUESTION 12
Which of the following is true regarding demand?
i. Demand is the relationship between quantity demanded and the price of a good when all other influences on buying plans remain the same.
ii. Demand refers to one quantity at one time.
iii. "Demand" and " quantity demanded" are the same thing.
both i and ii | ||
i only. | ||
ii only. | ||
iii only. |
1 points
QUESTION 13
Suppose the current price of a pound of steak is $6 per pound and the equilibrium price is $9 per pound. What takes place?
There is a shortage, so the price rises and quantity demanded decreases. | ||
There is a shortage, so the price rises and quantity demanded increases. | ||
There is a shortage, so the price falls and quantity demanded increases. | ||
There is a surplus, so the price falls and quantity demanded increases. |
1 points
QUESTION 14
The number of corn producers increases, so the supply of corn ________ and the supply curve of corn ________.
decreases; shifts leftward | ||
decrease; shifts rightward | ||
increases; shifts rightward | ||
increases; shifts leftward |
1 points
QUESTION 15
Market equilibrium
i. can never occur because there are always people who want a good but cannot afford it.
ii. occurs at the intersection of the supply and demand curves.
iii. is the point where the price equals the quantity.
iii only | ||
ii and iii | ||
ii only | ||
i only |
1 points
QUESTION 16
Milk can be used to produce cheese or butter. If the price of a pound of butter rises, what happens to the supply of cheese?
The supply of cheese stays the same and there is a decrease in the quantity supplied of cheese. | ||
The supply of cheese decreases. | ||
The supply of cheese stays the same and there is no change in the quantity supplied of cheese. | ||
The supply of cheese increases. |
1 points
QUESTION 17
Consumers regard Dell computers and Apple computers as substitutes. If the price of a Dell computer decreases, the
demand for Dell computers decreases. | ||
demand for Apple computers increases. | ||
demand for Apple computers decreases. | ||
demand for Dell computers increases. |
1 points
QUESTION 18
Suppose the current price of a pound of steak is $12 per pound and the equilibrium price is $9 per pound. In this case, there is a
surplus, so the price rises and quantity demanded increases. | ||
shortage, so the price rises and quantity demanded decreases. | ||
surplus, so the price falls and quantity demanded increases. | ||
shortage, so the price falls and quantity demanded increases. |
1 points
QUESTION 19
Plywood is used in the construction of houses. If the price of plywood rises, what happens to the supply of houses?
The supply increases so that the supply curve shifts rightward. | ||
The quantity supplied increases but there is no shift in the supply curve. | ||
The supply decreases so that the supply curve shifts leftward. | ||
The quantity supplied decreases but there is no shift in the supply curve. |
1 points
QUESTION 20
In stores, it is common to find seasonal products marked down when the season ends. What explains this behavior?
The store is trying to increase its customers' demand for the product. | ||
The law of demand is being used to increase the quantity demanded. | ||
The store manager must be trying to drive away customers by selling low quality products. | ||
The store is trying to increase its consumer's incomes by increasing their purchasing power. |
1 points
QUESTION 21
Suppose that the price of flour used to produce bagels increases. Hence the equilibrium price of a bagel ________ and the equilibrium quantity ________.
rises; increases | ||
rises; decreases | ||
falls; increases | ||
falls; decreases |
1 points
QUESTION 22
If both the supply and demand curves shift simultaneously, we can always predict what will happen to
either the price or the quantity, but not both. | ||
only the quantity. | ||
only the price. | ||
both the price and the quantity. |
1 points
QUESTION 23
If income increases and the demand for bus rides decreases,
bus rides are a substitute good. | ||
consumers are behaving irrationally. | ||
bus rides are an inferior good. | ||
bus rides are a normal good. |
1 points
QUESTION 24
A surplus of cardboard boxes means that
at the current price of a cardboard box, the quantity demanded equals the quantity supplied and the price will fall to restore the equilibrium.. | ||
the current price of a cardboard box is less than the equilibrium price. | ||
at the current price of a cardboard box, the quantity demanded exceeds the quantity supplied. | ||
at the current price of a cardboard box, the quantity demanded is less than the quantity supplied. |
1 points
QUESTION 25
If a freeze destroys oranges before they are harvested, the equilibrium price of an orange ________ and the equilibrium quantity ________.
rises; increases | ||
rises; decreases | ||
falls; increases | ||
falls; decreases |
1 points