97. Which of the following is not always correct in a closed economy?

D.Private saving equals investment.

A.National saving equals private saving plus public saving.

C. Real GDP measures both income and expenditures.

99. A budget surplus is created if

D.None of the above are correct.

A.the government sells more bonds than it buys back.

B.the government spends more than it receives in tax revenue.

C. private savings are greater than zero.

100. In the language of macroeconomics, investment refers to

C. the purchase of stocks, bonds, or mutual funds.

101. Which of the following would a macroeconomist consider as investment?

C. Alice builds a new restaurant.

A.Ernest purchases a bond issued by Star-Kist.

B.Jerry purchases stock issued by IBM.

102. Henry buys a bond issued by Ralston Purina, which uses the funds to buy new machinery for one of its factories.

D.Henry is saving; Ralston Purina is investing.

A.Henry and Ralston Purina are both investing.

B.Henry and Ralston Purina are both saving.

C. Henry is investing; Ralston Purina is saving.

103. The source of the supply of loanable funds

A.is saving and the source of demand for loanable funds is investment.

B.is investment and the source of demand for loanable funds is saving.

C. and the demand for loanable funds is saving.

D.and the demand for loanable funds is investment.

104. The slope of the demand for loanable funds curve represents the

B.negative relation between the real interest rate and investment.

A.positive relation between the real interest rate and investment.

C. positive relation between the real interest rate and saving.

D.negative relation between the real interest rate and saving.

105. Fred is considering expanding his dress shop. If interest rates rise he is

C. less likely to expand. This illustrates why the demand for loanable funds slopes downwarD.

A.less likely to expand. This illustrates why the supply of loanable funds slopes downwarD.

B.more likely to expand. This illustrates why the supply of loanable funds slopes upwarD.

D.more likely to expand. This illustrates why the demand for loanable funds slopes upwarD.

106. The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. The increase in the rate of interest should

D.make it less likely that The Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher.

A.not influence the decision to build the factory because The Eye of Horus doesn’t have to borrow any money.

B.not influence the decision to build the factory because its stockholders are expecting a new factory.

C. make it more likely that The Eye of Horus will build the factory because a higher interest rate will make the factory more valuable.

107. The slope of the supply of loanable funds curve represents the

B.positive relation between the real interest rate and saving.

A.positive relation between the real interest rate and investment.

C. negative relation between the real interest rate and investment.

D.negative relation between the real interest rate and saving.

108. A higher interest rate induces people to

A.save more, so the supply of loanable funds slopes upward.

B.save less, so the supply of loanable funds slopes downwarD.

C. invest more, so the supply of loanable funds slopes upward.

D.invest less, so the supply of loanable funds slopes downwarD.

109. The supply of loanable funds slopes

A. upward because an increase in the interest rate induces people to save more.

B. downward because an increase in the interest rate induces people to save less.

C. downward because an increase in the interest rate induces people to invest less.

D. upward because an increase in the interest rate induces people to invest more.

110. If the current market interest rate for loanable funds is below the equilibrium level, then the quantity of loanable funds

A.demanded will exceed the quantity of loanable funds supplied and the interest rate will rise.

B.supplied will exceed the quantity of loanable funds demanded and the interest rate will rise.

C. demanded will exceed the quantity of loanable funds supplied and the interest rate will fall.

D.supplied will exceed the quantity of loanable funds demanded and the interest rate will fall.

111. If the current market interest rate for loanable funds is above the equilibrium level, then

D.the quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will fall.

A.the quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will rise.

B.the quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will rise.

C. the quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will fall.

112. If the current market interest rate for loanable funds is below the equilibrium level, then there is a

B.shortage of loanable funds and the interest rate will rise.

A.surplus of loanable funds and the interest rate will rise.

C. shortage of loanable funds and the interest rate will fall.

D.surplus of loanable funds and the interest rate will fall.

113. If the current market interest rate for loanable funds is above the equilibrium level, then there is a

D.surplus of loanable funds and the interest rate will fall.

A.surplus of loanable funds and the interest rate will rise.

B.shortage of loanable funds and the interest rate will rise.

C. shortage of loanable funds and the interest rate will fall.

114. If there is shortage of loanable funds, then

C. neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium.

A.the supply for loanable funds shifts right and the demand shifts left.

B.the supply for loanable funds shifts left and the demand shifts right.

D.neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

115. If there is surplus of loanable funds, then

D.neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

A.the supply for loanable funds shifts right and the demand shifts left.

B.the supply for loanable funds shifts left and the demand shifts right.

C. neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium.

116. The nominal interest rate is the

B.interest rate as usually reported by banks.

A.interest rate corrected for inflation .

C. real rate of return to the lender.

D.real cost of borrowing to the borrower.

121. Generally when economists and the text talk of the "interest rate," they are talking about the

B.current nominal interest rate.

C. real interest rate minus the inflation rate.

D.equilibrium nominal interest rate.

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

C. The supply of loanable funds would shift left.

A.The supply of loanable funds would shift right.

B.The demand for loanable funds would shift right.

D.The demand for loanable funds would shift left.

123. What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

D.None of the above are correct.

A.The supply of and demand for loanable funds would shift right.

B.The supply of and demand for loanable funds would shift left.

C. The supply of loanable funds would shift right and the demand for loanable funds would shift left.

124. Suppose that the government were to replace the income tax with a consumption tax. This would make the interest rate

D.decrease and investment increase.

C. increase and investment decrease.

125. Which of the following would not be a result of replacing the income tax with a consumption tax?

A.The interest rate would decrease.

C. The standard of living would eventually rise.

D.The supply of loanable funds would shift right.

126. In 1995 Congressperson Bill Archer proposed that the income tax be replaced with a consumption tax. If his program had been passed, then today it is likely that the equilibrium interest rate

D.would be lower and the equilibrium quantity of loanable funds would be higher.

A.and quantity of loanable funds would be lower.

B.and quantity of loanable funds would be higher.

C. would be higher and the equilibrium quantity of loanable funds would be lower.

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

B.Interest rates would be unaffected.

D.The change in the interest rate would be ambiguous.

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

A.There would be an increase in the amount of loanable funds borrowed.

B.There would be a reduction in the amount of loanable funds borrowed.

C. There would be no change in the amount of loanable funds borrowed.

D.The change in loanable funds borrowed would be ambiguous.

129. If Congress reduced the tax rate on interest income, investment

A.would increase and saving would decrease.

B.would decrease and saving would increase.

130. Suppose a country has a consumption tax that is similar to a state sales tax. If its government eliminates the consumption tax and replaces it with an income tax that includes an income tax on interest from savings, what happens?

C. The interest rate increases and saving decreases.

A.There is no change in the interest rate or saving.

B.The interest rate decreases and saving increases.

D.None of the above are correct.

131. Suppose the U.S. government allowed taxpayers to earn their fifirst $5,000 of interest income tax free. This would shift the

A.supply for loanable funds right making interest rates fall.

B.supply of loanable funds left making interest rates rise.

C. demand for loanable funds right making the interest rate rise.

D.demand for loanable funds left making the interest rate fall.

132. Other things the same, countries that tax saving less will have

A.lower interest rates and higher investment than other countries.

B.lower interest rates and lower investment than other countries.

C. higher interest rates and higher investment than other countries.

D.higher interest rates and lower investment than other countries.

133. Which of the following is incorrect?

A.American families save a larger fraction of their incomes than their counterparts in many other countries such as Germany and Japan.

B.Saving is an important long-run determinant of a nation’s standard of living.

C. A change in the tax law that encouraged greater saving would lower interest rates.

D.Taxes on interest income can substantially decrease the future value of current saving.

134. Suppose that Congress were to institute an investment tax credit. What would happen in the market for loanable funds?

C. The demand for loanable funds would shift right.

A.The demand for loanable funds would shift left.

B.The supply of loanable funds would shift left.

D.The supply of loanable funds would shift right.

135. Suppose that Congress were to repeal an investment tax credit. What would happen in the market for loanable funds?

D.The demand for loanable funds would shift left.

A.The demand and supply of loanable funds would shift right.

B.The demand and supply of loanable funds would shift left.

C. The supply of loanable funds would shift right.

136. A country repealed its investment tax credit. The effffects of this are represented by shifting the

D.None of the above are correct.

A. demand for and the supply of loanable funds to the right.

B. demand for and the supply of loanable funds to the left.

C. supply of loanable funds to the right and the demand for loanable funds to the left.

138. Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds?

B.The interest rate and investment would rise.

A.The interest rate and investment would fall.

C. The interest rate would rise and investment would fall.

D.None of the above is necessarily correct.

139. A poor country decides to institute an investment tax credit. As a result

D.both interest rates and investment rise.

A.interest rates rise and investment falls.

B.interest rates fall and investment rises.

C. both interest rates and investment fall.

140. If the government currently has a budget deficit,

A.it does not necessarily have a debt.

C. government expenditures are greater than taxes.

141. An increase in the budget deficit

A.changes the supply of loanable funds.

B.changes the demand for loanable funds.

C. changes both the supply of and demand for loanable funds.

D.does not influence the supply of or the demand for loanable funds.

142. Other things the same, a government budget deficit

C. reduces both public and national saving.

A.increases both private saving and national saving.

B.increases public saving but reduces national saving.

D.reduces private saving, but increases national saving.

143. In the last few years the U.S. government has gone from a surplus to a deficit. Other things the same, this means that

B.supply of loanable funds shifted left.

A.supply of loanable funds shifted right.

C. demand for loanable funds shifted right.

D.demand for loanable funds shifted left.

144. If Canada increases its budget deficit, it will reduce

C. public saving and so shift the supply of loanable funds left.

A.private saving and so shift the supply of loanable funds left.

B.investment and so shift the demand for loanable funds left.

D.None of the above are correct.

Chapter 26 (B)

Authored by Hằng Nguyễn

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MULTIPLE CHOICE QUESTION

2 mins • 1 pt

82. In a closed economy, national saving equals

A.investment.

B.income minus the sum of consumption and government expenditures.

C. private saving plus public saving.

D.All of the above are correct.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

83. In a closed economy, national saving is

A.usually greater than investment.

B.equal to investment.

C. usually less than investment because of the leakage of taxes.

D.always less than investment.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

84. In a closed economy, what remains after paying for consumption and government purchases is

A.national disposable income.

B.national saving.

C. public saving.

D.private saving.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

85. In a closed economy, what does (T – G) represent?

A.national saving

B.investment

C. private saving

D.public saving

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

86. In a closed economy, what does (Y – T – C) represent?

A.national saving

B.government tax revenue

C. public saving

D.private saving

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

95. In a closed economy, private saving is

A.the amount of income that households have left after paying for their taxes and consumption.

B.the amount of income that businesses have left after paying for the factors of production.

C. the amount of tax revenue that the government has left after paying for its spending.

D.always equal to investment.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

96. In a closed economy, public saving is the

A.amount of income that households have left after paying for taxes and consumption.

B.amount of income that businesses have left after paying for the factors of production.

C. amount of tax revenue that the government has left after paying for its spending.

D.sum of the A, B, and C.

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Chapter 26 (B)

82. In a closed economy, national saving equals

83. In a closed economy, national saving is

84. In a closed economy, what remains after paying for consumption and government purchases is

85. In a closed economy, what does (T – G) represent?

86. In a closed economy, what does (Y – T – C) represent?

95. In a closed economy, private saving is

96. In a closed economy, public saving is the

97. Which of the following is not always correct in a closed economy?

98. If the tax revenue of the federal government exceeds spending, then the government

99. A budget surplus is created if

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