ECON 201 Study Guide - Loanable Funds, Real Interest Rate, Nominal 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. |
6. If there is a shortage of loanable funds, then
|
a. |
the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. |
|
b. |
the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. |
|
c. |
the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. |
|
d. |
the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium. |
7. We associate the term debt finance with
|
a. |
the bond market and we associate the term equity finance with the stock market. |
|
b. |
the stock market and we associate the term equity finance with the bond market. |
|
c. |
financial intermediaries and we associate the term equity finance with financial markets. |
|
d. |
financial markets and we associate the term equity finance with financial intermediaries. |
8. If the demand for loanable funds shifts to the right, then the equilibrium interest rate
|
a. |
and the quantity of loanable funds rises. |
|
b. |
and the quantity of loanable funds falls. |
|
c. |
rises and the quantity of loanable funds falls. |
|
d. |
falls and the quantity of loanable funds rises. |
9. Long-term bonds are
|
a. |
riskier than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds. |
|
b. |
riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds. |
|
c. |
less risky than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds. |
|
d. |
less risky than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds. |
10. Compared to bondholders, stockholders
|
a. |
face higher risk and have the potential for higher returns. |
|
b. |
face higher risk but receive a fixed payment. |
|
c. |
face lower risk and have the potential for higher returns. |
|
d. |
face lower risk but receive a fixed payment. |
11. The old adage, 'don't put all your eggs in one basket', is very similar to a modern bit of advice concerning financial matters:
|
a. |
Buy low-risk bonds. |
|
b. |
Use a medium of exchange. |
|
c. |
Diversify. |
|
d. |
Intermediate. |
12. A budget surplus is created if
|
a. |
the government sells more bonds than it buys back. |
|
b. |
the government spends more than it receives in tax revenue. |
|
c. |
private saving is greater than zero. |
|
d. |
None of the above is correct. |
