Question 1

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

When the government runs a budget surplus, it means that they are taking in more revenue than they are spending. This excess money can be used to increase the supply of loanable funds in the market, leading to a lower real interest rate as demand for borrowing decreases. Choice A correctly identifies this relationship.

Question 2

In November 2008, Grand Canyon Education chose to finance expansion by offering ownership in its firm. These owners of Grand Canyon Education the are entitled to a share of the firm's profits. This financing is an example of ________.

Accepted Answer

Issuing stock refers to the process of raising capital by offering ownership in a company to investors. The investors who buy the stock become shareholders and are entitled to a share of the company's profits. This is different from a mortgage or a bond, which involve borrowing money that must be repaid with interest. Gross investment refers to the total amount of money spent on capital goods, such as equipment or buildings, in a given time period.

Question 3

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%

Question 4

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 decrease in profit expectations would lead firms to borrow less, shifting the demand curve for loanable funds to the left, not affecting the supply curve directly.

Question 5

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 other financial institutions have less capital to lend out, which decreases the supply of loanable funds. This shift to the left in the supply curve leads to an increase in the real interest rate.

Question 6

In November 2008, automobile executives from Ford, GM and Chrysler testified to Congress that their firms needed a $25 billion bailout to prevent bankruptcies. The executives stated that part of the cash would be used to re-design production lines. The $25 billion is ________ and the re-designed production lines are ________.

Accepted Answer

The $25 billion is financial capital because it is a sum of money that can be invested. The re-designed production lines are physical capital because they are tangible assets, such as equipment and facilities, used in the production process.

Question 7

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 transaction described involves securing financing by promising to pay a lender specific amounts on specific dates, which is characteristic of a bond. Bonds are traded in the financial market, not the physical market.

Question 8

In 2007, France's GDP totaled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. To calculate the amount of net investment in France for these years, you need to know ________.

Accepted Answer

Net investment is calculated by subtracting depreciation from the amount spent on new capital. Therefore, you need to know the amount of depreciation to calculate net investment.

Question 9

The table below shows data for the U.S.

Between 2014 and 2015 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 10

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...

Question 11

A decrease in the government budget deficit decreases the ________ loanable funds and an increase in the government budget surplus increases the ________ loanable funds.

Accepted Answer

A decrease in the government budget deficit means the government is borrowing less, reducing the demand for loanable funds. An increase in the government budget surplus means the government has extra funds, which can be lent out, increasing the supply of loanable funds.

Question 12

The table below shows data for the United States.

Between 2013 and 2014, 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 13

If the Ricardo-Barro effect is present, a government budget deficit raises the equilibrium real interest rate by ________ and decreases the equilibrium quantity of investment by ________ than if the Ricardo-Barro effect is absent.

Accepted Answer

The answer of If the Ricardo-Barro effect is present, a...

Question 14

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 money than it is collecting in taxes. To finance this deficit, the government may borrow money by issuing bonds. This increases the demand for loanable funds, leading to a higher interest rate and potentially crowding out private investment. Therefore, choice C is the correct answer.

Question 15

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 is

Accepted Answer

The interest rate is calculated by dividing the profit by the price of the stock, so $43 / $430 = 0.1 or 10 percent.

Question 16

In 2007, France's GDP totaled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. Suppose that depreciation is 12 percent of GDP. ________ investment in 2006 was ________ billion.

Accepted Answer

To calculate net investment, we subtract depreciation from gross investment. 
Depreciation in 2006 = 12% * $1.8 trillion = $216 billion 
Net investment in 2006 = $335 billion - $216 billion = $119 billion 
Therefore, the correct choice is C.

Question 17

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 firms expect higher profits, the demand for loanable funds increases, leading to a rightward shift of the demand curve. This causes the real interest rate to increase, as there is greater competition for a limited supply of loanable funds.

Question 18

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

To calculate the real interest rate, we subtract the inflation rate from the nominal interest rate. In this case, the nominal interest rate is 2 percent and the inflation rate is 3.4 percent. So, the real interest rate is -1.4 percent (2% - 3.4%), meaning the value of money saved has decreased by 1.4 percent over the course of the year.

Question 19

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 times of higher default risk, financial institutions become more risk-averse and may hold onto their funds instead of lending them out. This results in a decrease in the supply of loanable funds. As the supply of loanable funds decreases, the cost of borrowing (i.e. real interest rate) rises to reflect the scarcity of available funds. Therefore, the correct choice is D: a decrease in the supply of loanable funds and a rise in the real interest rate.

Question 20

In 2007, France's GDP totaled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. Suppose that depreciation is 12 percent of GDP. ________ investment in 2007 was ________ billion.

Accepted Answer

Net investment is calculated by subtracting depreciation from gross investment. Depreciation for 2007 is 12% of the 2007 GDP ($1.9 trillion), which is $228 billion. Gross investment in 2007 is $357 billion. Therefore, net investment = $357 billion - $228 billion = $129 billion.

Quiz 7: Finance, Saving, and Investment

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

In November 2008, Grand Canyon Education chose to finance expansion by offering ownership in its firm. These owners of Grand Canyon Education the are entitled to a share of the firm's profits. This financing is an example of ________.

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

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 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 .

In 2007, France's GDP totaled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. To calculate the amount of net investment in France for these years, you need to know ________.

The table below shows data for the U.S. Between 2014 and 2015 the real interest rate and caused a the demand for loanable funds curve.

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.

A decrease in the government budget deficit decreases the loanable funds and an increase in the government budget surplus increases the loanable funds.

The table below shows data for the United States. Between 2013 and 2014, the real interest rate and caused a the demand for loanable funds curve.

If the Ricardo-Barro effect is present, a government budget deficit raises the equilibrium real interest rate by and decreases the equilibrium quantity of investment by than if the Ricardo-Barro effect is absent.

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

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 is

In 2007, France's GDP totaled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. Suppose that depreciation is 12 percent of GDP. investment in 2006 was billion.

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 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

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 2007, France's GDP totaled $1.9 trillion and in 2006 GDP was $1.8 trillion. The total amount spent on new capital in 2007 was $357 billion and in 2006 was $335 billion. Suppose that depreciation is 12 percent of GDP. investment in 2007 was billion.