ch. 9 practice quiz

If $100 is saved at an annual interest rate of 10%, at the end of the one year, the saver will have:

$110.

Time preference is:

the desire to have goods and services sooner rather than later (all other things being equal).

The price of savings is:

the interest rate.

The supply of savings curve shows the relationship between savings and:

the interest rate.

The supply of savings function shows the relationship between saving and:

the interest rate.

Most individuals save during:

the middle and later years of life before retirement.

Investment is defined as:

the purchase of new capital goods.

Investment is:

the purchase of new capital goods.

Individual saving contributes to:

the supply of loanable funds.

The life-cycle theory of savings predicts individuals will save during:

the working years of life.

China has a higher saving rate than the United States. One economic explanation for this fact is that:

there is a higher rate of time preference for Americans than for the Chinese.

Which of the following best represents time preference?

Alex smokes a pack of cigarettes per day even though he knows that he may face poor health down the road because of his smoking habit.

Which of the following explains why the supply of savings is upward sloping?

An increase in the interest rate leads to an increase in the quantity of saving.

The desire to have goods and services sooner rather than later is called:

time preference.

Which of the following is NOT a reason people save during their working lifetimes?

to allow for a more volatile consumption path over time

Which of the following is NOT a reason individuals typically choose to save?

to increase investment

The savings supply curve is:

upward sloping.

The supply of savings function is:

upward sloping.

If income and consumption are equal, saving must be:

zero.

Why is saving so minimal in nations with a high population of AIDS victims?

People with a short life expectancy tend to save less.

Which of the following can be defined as saving, according to economics?

Sandra purchases a certificate of deposit from a bank.

Which is NOT a reason people save during their working lifetimes?

They save to match income and spending from year to year.

The consumption-smoothing theory implies that a country whose people have a very low life expectancy has:

a low savings rate.

The main reason people save during their working years is:

a preference toward a smooth consumption path over time.

Buying stock in a company is:

a transfer of ownership rights.

In financial markets, which group best represents the demand side of the market?

borrowers

Consumption smoothing means:

borrowing to consume more than one's income in low-income years and consuming less than one's income in high-income years.

People smooth their consumption over their lifetime by:

both borrowing and saving.

If the interest rate increases, then:

both the quantity saved and the quantity supplied of loanable funds will increase.

According to the life-cycle theory of savings, a typical person's:

consumption is smooth over their entire lifetime.

A seasonal worker saves more when her income rises and saves less when her income falls. This behavior is referred to as:

consumption smoothing.

The AIDS epidemic _____ the savings rate in Africa.

decreases

In reference to the consumption-smoothing theory, a person typically saves the most:

during working years.

All else equal, time preference is the desire to:

have goods and services sooner rather than later.

Time preference is the desire to:

have goods and services sooner rather than later.

According to the consumption-smoothing theory, people with a longer life expectancy:

have higher savings rates in their lifetimes than those with shorter life expectancy.

Other things being equal, a person typically has the largest pool of savings:

immediately before retirement.

Saving is defined as:

income not spent on consumption goods.

Saving is:

income that is not spent on consumption goods.

Savings is:

income that is not spent on consumption goods.

Higher interest rates typically _____ saving, ceteris paribus.

increase

When a family's income becomes more uncertain, we expect its saving to:

increase

An increase in life expectancy should cause saving in the United States to:

increase.

People will usually save more if the interest rate:

is higher.

The supply curve for savings indicates that the higher the interest rate, the:

larger the quantity saved.

All else being equal, a working-age person who has more patience tends to have:

more savings.

Which of the following is NOT considered saving?

paying tuition for a college education

The supply of savings is positively sloped because:

people are enticed to forgo consumption when interest rates are higher.

Economist Franco Modigliani's life-cycle theory of savings proposes that in order to maximize lifetime satisfaction, consumers:

practice consumption smoothing by borrowing and saving.

In economics, investment refers to the:

purchase of new capital goods.

Fluctuations in income cause most people to:

save.

People with a high time preference are less likely to:

save.

On the basis of their role in the financial system, venture capitalists are BEST described as:

savers.

When a person's income is greater than her spending on consumption goods, then she is:

saving.

What do we call income that is NOT spent on consumption goods?

savings

Individuals typically enjoy _____ consumption.

smooth

Workers who put 10% of their income into a retirement account each year are:

smoothing consumption.

What is an example of impatience in economic behavior?

taking the first job you are offered

Which of the following do economists consider an investment?

the construction of a new factory