Question 1

Suppose firms become more optimistic about the economy's ability to avoid a recession and hence expected profit increases.As a result,the demand for loanable funds curve shifts ________ and the real interest rate ________.

Accepted Answer

If firms become more optimistic about the economy, they will likely increase their investment and borrowing, causing an increase in the demand for loanable funds. This shift will cause the demand for loanable funds curve to shift rightward. With the increase in demand for loanable funds, the real interest rate will rise as lenders would want to charge higher rates to lend their funds to the borrowers who are now more optimistic and hence less risky. Therefore, the correct answer is D- rightward shift in the demand for loanable funds curve and rising real interest rates.

Question 2

-The figure above shows the loanable funds market.At an interest rate of

Accepted Answer

The answer of 
-The figure above shows the loanable funds...

Question 3

If the real interest rate is less than the equilibrium real interest rate,there is a ________ of loanable funds,and ________.

Accepted Answer

When the real interest rate is below the equilibrium, there is a shortage of loanable funds because the demand for loans exceeds the supply, leading to some borrowers being unable to find the funds they want.

Question 4

Suppose that there is an increase in disposable income and simultaneously an increase in the expected profitability of investment.As a result,the equilibrium real interest rate ________ and the equilibrium quantity of loanable funds ________.

Accepted Answer

An increase in disposable income increases savings, shifting the supply of loanable funds to the right. An increase in expected profitability of investment increases demand for loanable funds, shifting the demand curve to the right. The equilibrium real interest rate might rise, fall, or remain unchanged depending on the relative shifts of supply and demand, but the equilibrium quantity of loanable funds will increase.

Question 5

When the real interest rate ________ the equilibrium real interest rate,there is a ________ of loanable funds and the real interest rate ________.

Accepted Answer

When the real interest rate is less than the equilibrium real interest rate, there is a shortage of loanable funds because the demand for loans exceeds the supply, causing the real interest rate to rise.

Question 6

The figure above shows the demand for loanable funds curve.
In the figure above,a movement from point A to point C can be the result of

Accepted Answer

A movement from point A to point C on the demand for loanable funds curve can only be caused by a fall in the real interest rate. This is because a fall in the real interest rate increases the demand for loanable funds, causing the curve to shift to the right from D₁ to D₂, resulting in an increase in the equilibrium quantity of loanable funds from Q₁ to Q₂, and a decrease in the equilibrium real interest rate from r₁ to r₂.

Question 7

-The figure above shows the loanable funds market.The equilibrium real interest rate is ________,and the equilibrium quantity of loanable funds is ________.

Accepted Answer

The answer of 
-The figure above shows the loanable funds...

Question 8

If expected profit falls,the demand for loanable funds curve shifts ________,and the real interest rate ________.

Accepted Answer

When expected profit falls, firms have less incentive to invest, which reduces the demand for loanable funds. Therefore, the demand for loanable funds curve shifts leftward. As the quantity of loanable funds demanded falls, the real interest rate falls as well in order to equate the reduced demand with the supply of loanable funds.

Question 9

For a government to add to the supply of loanable funds,it must

Accepted Answer

A government can add to the supply of loanable funds by running a budget surplus, which means that it collects more in revenue than it spends. The surplus can be saved and made available for lending, increasing the supply of loanable funds available in the market. This can help reduce interest rates and stimulate private investment.

Question 10

-The figure above shows the loanable funds market.If the real interest rate is 8 per cent,then

Accepted Answer

The answer of 
-The figure above shows the loanable funds...

Question 11

The figure above shows the supply of loanable funds curve.
In the figure above,a movement from point A to point C can be the result of

Accepted Answer

The answer of 
The figure above shows the supply of...

Question 12

-The figure above shows the loanable funds market.If the real interest rate is 3 per cent,then

Accepted Answer

The answer of 
-The figure above shows the loanable funds...

Question 13

-The figure above shows the loanable funds market.At an interest rate of

Accepted Answer

The answer of 
-The figure above shows the loanable funds...

Question 14

-The figure above shows the loanable funds market.The equilibrium real interest rate is ________ per cent,and the equilibrium quantity of loanable funds is ________.

Accepted Answer

The answer of 
-The figure above shows the loanable funds...

Question 15

-In the figure above,the shift in the supply of loanable funds curve from SLF₁ to SLF₃ could be the result of

Accepted Answer

The answer of 
-In the figure above,the shift in the...

Question 16

Government saving is equal to

Accepted Answer

Government saving is defined as net taxes minus government expenditures. This represents the amount of funds that the government has left over after it has collected taxes and paid its expenses. Option A is incorrect because it includes government expenditures in the calculation, which is subtracted from net taxes to find government saving. Option B is incorrect because it only considers taxes and not government expenditures. Option C is incorrect because it refers to the quantity of investment demanded, which is not the same as government savings. Option E is incorrect because it subtracts government expenditures from private savings instead of net taxes.

Question 17

-In the figure above,the shift in the supply of loanable funds curve from SLF₁ to SLF₂ could be the result of

Accepted Answer

The answer of 
-In the figure above,the shift in the...

Question 18

-In the loanable funds market,a shortage of loanable funds occurs when the

Accepted Answer

The answer of 
-In the loanable funds market,a shortage of...

Question 19

If a government has a budget deficit,it must

Accepted Answer

If a government has a budget deficit, it means it is spending more money than it is collecting in revenue. In order to finance this deficit, the government must borrow funds from the loanable funds market, either domestically or internationally. This is done by issuing government bonds, which are purchased by investors such as individuals or foreign governments. Increasing taxes or decreasing expenditures could help reduce the deficit, but borrowing is the only option for financing it in the short term. Lowering the real interest rate may also help stimulate economic growth, but it is not directly related to financing the deficit. Therefore, the best choice for a government with a budget deficit is to borrow in the loanable funds market.

Question 20

If a surplus of loanable funds exists in the loanable funds market,the real interest rate ________ and the quantity of saving ________.

Accepted Answer

When a surplus of loanable funds exists in the market, there is an excess supply of funds, which leads to a decrease in the real interest rate. This decrease in the interest rate, in turn, leads to a decrease in the quantity of saving, as people are less incentivized to save when they can borrow at a lower rate. Therefore, option B - falls; decreases - is the correct answer.

Quiz 9: Finance,saving and Investment

Suppose firms become more optimistic about the economy's ability to avoid a recession and hence expected profit increases.As a result,the demand for loanable funds curve shifts and the real interest rate .

-The figure above shows the loanable funds market.At an interest rate of

If the real interest rate is less than the equilibrium real interest rate,there is a of loanable funds,and .

Suppose that there is an increase in disposable income and simultaneously an increase in the expected profitability of investment.As a result,the equilibrium real interest rate and the equilibrium quantity of loanable funds .

When the real interest rate the equilibrium real interest rate,there is a of loanable funds and the real interest rate .

The figure above shows the demand for loanable funds curve. In the figure above,a movement from point A to point C can be the result of

-The figure above shows the loanable funds market.The equilibrium real interest rate is ,and the equilibrium quantity of loanable funds is .

If expected profit falls,the demand for loanable funds curve shifts ,and the real interest rate .

For a government to add to the supply of loanable funds,it must

-The figure above shows the loanable funds market.If the real interest rate is 8 per cent,then

The figure above shows the supply of loanable funds curve. In the figure above,a movement from point A to point C can be the result of

-The figure above shows the loanable funds market.If the real interest rate is 3 per cent,then

-The figure above shows the loanable funds market.At an interest rate of

-The figure above shows the loanable funds market.The equilibrium real interest rate is per cent,and the equilibrium quantity of loanable funds is .

-In the figure above,the shift in the supply of loanable funds curve from SLF₁ to SLF₃ could be the result of

Government saving is equal to

-In the figure above,the shift in the supply of loanable funds curve from SLF₁ to SLF₂ could be the result of

-In the loanable funds market,a shortage of loanable funds occurs when the

If a government has a budget deficit,it must

If a surplus of loanable funds exists in the loanable funds market,the real interest rate and the quantity of saving .