Question 1

Begin with the formula showing how households can divide their income.Then use this formula and the expenditure approach to GDP to show how investment is financed from three sources.

Accepted Answer

The answer of Begin with the formula showing how households...

Question 2

In 2008,Germany had a budget deficit of 37 billion euros. This deficit resulted in

Accepted Answer

A budget deficit means that the government is spending more than it is generating in revenue, causing a decrease in national savings. This decrease in savings leads to a decrease in the supply of loanable funds, causing interest rates to increase. As a result, investment decreases due to the crowding out effect, in which private investment is crowded out by government borrowing.

Question 3

In 2007,France's exports totalled $490 billion and its imports totalled $529 billion. As a result,France is an international ________ and financial funds from around the world ________ France's market for loanable funds.

Accepted Answer

The answer of In 2007,France's exports totalled $490 billion and...

Question 4

What is the influence of the expected profit and the real interest rate on the amount of investment firms make?

Accepted Answer

The answer of What is the influence of the expected...

Question 5

During the financial crisis in 2007 and 2008,financial institutions believed that default risks were higher. As a result,there was ________ in the supply of loanable funds and a ________ in the real interest rate.

Accepted Answer

During the financial crisis, the financial institutions believed that there was a higher risk of default, which resulted in a decrease in the supply of loanable funds. When supply decreases, the real interest rate generally rises as the cost of borrowing increases. Therefore, there was a decrease in the supply of loanable funds and a rise in the real interest rate.

Question 6

In January 2013,you can put your savings in a Bank of America account and be paid 2 percent per year. During 2013,suppose the inflation rate is 3.4 percent. In 2013 you earned a real interest rate of

Accepted Answer

The real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. In this case, the real interest rate is 2% - 3.4% = -1.4%. This means that the purchasing power of your savings has decreased by 1.4% over the course of the year, even though you earned 2% in nominal terms.

Question 7

A share of Apple stock has a price of $430 and gives $43 of Apple profit to its owner. The interest rate on this share

Accepted Answer

The interest rate or yield on the share is calculated by dividing the profit ($43) by the price of the share ($430) and then multiplying by 100 to get a percentage: (43/430) * 100 = 10 percent.

Question 8

In 2007,France's exports totaled $490 billion and its imports totaled $529 billion.As a result,the I. rest of the world supplies funds to France.
II) quantity of loanable funds in France is less than the supply.
III) Ricardo-Barro effect occurs in France.

Accepted Answer

Based on the given information, France has a trade deficit (imports exceed exports) of $39 billion, meaning it is borrowing funds from the rest of the world to finance its imports. However, there is no information provided to support the claim that the quantity of loanable funds in France is less than the supply or that the Ricardo-Barro effect (the idea that government deficits lead to higher interest rates and reduced private investment) is occurring in France. Therefore, only statement I is true.

Question 9

What is the approximate relationship among the real interest rate,the inflation rate,and the nominal interest rate?

Accepted Answer

The answer of What is the approximate relationship among the...

Question 10

In 2007,Singapore's government ran a budget surplus of $4.5 billion. The budget surplus ________ loanable funds and ________ the real interest rate.

Accepted Answer

A budget surplus means that the government is taking in more money than it is spending. This increases the supply of loanable funds in the economy, as the government has excess funds that it can lend out. With an increase in supply and a constant demand for loanable funds, the real interest rate will decrease according to the law of supply and demand.

Question 11

In 2008,Germany had a budget deficit of 37 billion euros. This will budget deficit ________ the supply of loanable funds and ________ the real interest rate.

Accepted Answer

The answer of In 2008,Germany had a budget deficit of...

Question 12

The table below shows data for the U.S. $$\begin{array} { | c | c | c | } 
\hline & \begin{array} { c } 
\text { Nominal } \
\text { Interest Rate }
\end{array} & \text { Inflation Rate } \
\hline 2011 & 5.25 & 4 \
\hline 2012 & 5 & 2 \
\hline 2013 & 4.5 & 4.3 \
\hline
\end{array}$$
Between 2012 and 2013 the real interest rate ________ and caused a ________ the demand for loanable funds curve.

Accepted Answer

The real interest rate is calculated as nominal interest rate minus inflation rate. 
For 2012, 
Real interest rate = 5 - 2 = 3 
For 2013, 
Real interest rate = 4.5 - 4.3 = 0.2 
Therefore, the real interest rate decreased between 2012 and 2013. This decrease results in a movement down along the demand for loanable funds curve, as lower real interest rates lead to increased demand for loanable funds. Thus, option B, decreased; movement down along, is the correct choice.

Question 13

In 2008,Australia had a government budget surplus of $21.7 billion. This budget surplus shifts the demand for loanable funds curve ________

Accepted Answer

A budget surplus reduces the government's demand for loans, thus reducing the overall demand for loanable funds. This shift the demand for loanable funds curve leftward, and causes a decrease in the real interest rate. Therefore, choice A is correct. B and C are incorrect because a budget surplus does not create a crowding-out effect, which occurs when the government's increased borrowing leads to a decrease in private investment. Choice D is also incorrect because the Ricardo-Barro effect relates to the existence of government debt rather than budget surplus.

Question 14

The table below shows data for the United States. $$\begin{array} { | c | c | c | } 
\hline & \begin{array} { c } 
\text { Nominal } \
\text { Interest Rate }
\end{array} & \text { Inflation Rate } \
\hline 2011 & 5.25 & 4 \
\hline 2012 & 5 & 2 \
\hline 2013 & 4.5 & 4.3 \
\hline
\end{array}$$
Between 2011 and 2012,the real interest rate ________ and caused a ________ the demand for loanable funds curve.

Accepted Answer

The answer of The table below shows data for the...

Question 15

In 2010,the United States and foreign economies start to recover from the recession. U.S.firms increase their profit expectations.As a result,the demand for loanable funds curve shifts ________ and the real interest rate ________.

Accepted Answer

When U.S. firms increase their profit expectations, they are likely to invest more, increasing the demand for loanable funds. This shifts the demand curve for loanable funds rightward, and as demand increases, the real interest rate also increases due to higher competition for available funds.

Question 16

In 2008,the many people became unable to make payments on their mortgages and instead defaulted on them.As a result,the ________ of loanable funds curve shifts ________ and real interest rate ________.

Accepted Answer

When many people default on their mortgages, banks and financial institutions have less capital to lend out, which decreases the supply of loanable funds. This shift in the supply curve to the left leads to an increase in the real interest rate.

Question 17

"An increase in the real interest rate increases the quantity of investment." Is the previous statement correct or incorrect?

Accepted Answer

The answer of "An increase in the real interest rate...

Question 18

In 2008,the financial and housing crisis caused firms to decrease their profit expectations. As a result,there was a ________ in the ________ for loanable funds curve.

Accepted Answer

A leftward shift in the demand for loanable funds curve occurs because firms expect lower profits and thus demand fewer loans for investment.

Question 19

The University of Central Florida (UCF) wanted "to create a town center where students can live,eat,study and revel in college traditions like football." In addition,the university needed funding to build dorms that would house 2000 students.UCF was able to secure financing by promising to pay a lender a specific amount of money on specific dates. This transaction takes place in the ________ market for ________ capital. www.sptimes.com 10/14/2007

Accepted Answer

The answer of The University of Central Florida (UCF) wanted...

Question 20

In 2007,the interest rate banks in France charge each other for loans was 4.86 percent. The inflation rate in France in 2007 was 2.8 percent. The real interest rate in France is

Accepted Answer

Real interest rate = Nominal interest rate - Inflation rate
Real interest rate = 4.86% - 2.8%
Real interest rate = 2.06%

Quiz 7: Finance, Saving, and Investment

Begin with the formula showing how households can divide their income.Then use this formula and the expenditure approach to GDP to show how investment is financed from three sources.

In 2008,Germany had a budget deficit of 37 billion euros. This deficit resulted in

In 2007,France's exports totalled $490 billion and its imports totalled $529 billion. As a result,France is an international and financial funds from around the world France's market for loanable funds.

What is the influence of the expected profit and the real interest rate on the amount of investment firms make?

During the financial crisis in 2007 and 2008,financial institutions believed that default risks were higher. As a result,there was in the supply of loanable funds and a in the real interest rate.

In January 2013,you can put your savings in a Bank of America account and be paid 2 percent per year. During 2013,suppose the inflation rate is 3.4 percent. In 2013 you earned a real interest rate of

A share of Apple stock has a price of $430 and gives $43 of Apple profit to its owner. The interest rate on this share

In 2007,France's exports totaled $490 billion and its imports totaled $529 billion.As a result,the I. rest of the world supplies funds to France. II) quantity of loanable funds in France is less than the supply. III) Ricardo-Barro effect occurs in France.

What is the approximate relationship among the real interest rate,the inflation rate,and the nominal interest rate?

In 2007,Singapore's government ran a budget surplus of $4.5 billion. The budget surplus loanable funds and the real interest rate.

In 2008,Germany had a budget deficit of 37 billion euros. This will budget deficit the supply of loanable funds and the real interest rate.

In 2008,Australia had a government budget surplus of $21.7 billion. This budget surplus shifts the demand for loanable funds curve ________

In 2010,the United States and foreign economies start to recover from the recession. U.S.firms increase their profit expectations.As a result,the demand for loanable funds curve shifts and the real interest rate .

In 2008,the many people became unable to make payments on their mortgages and instead defaulted on them.As a result,the of loanable funds curve shifts and real interest rate .

"An increase in the real interest rate increases the quantity of investment." Is the previous statement correct or incorrect?

In 2008,the financial and housing crisis caused firms to decrease their profit expectations. As a result,there was a in the for loanable funds curve.

In 2007,the interest rate banks in France charge each other for loans was 4.86 percent. The inflation rate in France in 2007 was 2.8 percent. The real interest rate in France is