Economics Chapter 16 Quiz

high

A person who greatly prefers present to future consumption has a(n) __________ rate of time preference. low high efficient roundabout

the quantity demanded of loanable funds rises.

As the interest rate falls, the quantity demanded of loanable funds rises. the quantity demanded of loanable funds falls. the demand for loanable funds rises. the supply of loanable funds falls.

the higher the interest rate.

Ceteris paribus, the more risk associated with a loan, the lower the interest rate. the higher the interest rate. the more likely the loan will be granted. the bigger the loan.

2.5 percent.

If the nominal interest rate is 5.5 percent and expected inflation rate is 3 percent, the real interest rate equals 8.5 percent. 2.5 percent. 13.5 percent. 11.5 percent.

are willing to save a larger percentage of your income than a person who has a high rate of time preference.

If you have a low rate of time preference, then you buy goods right now because "you just can't wait." are willing to save a larger percentage of your income than a person who has a high rate of time preference. find it difficult to save much of your income because money "just sitting around" is worthless to you. are willing to borrow money to buy goods now.

all of the above

Interest rates differ because of differences in risk the term of the loan. the cost of making the loan. all of the above

Yes. Interest is a dollar payment for the use of funds, whereas interest rate is the ratio of that dollar amount to the total amount of funds borrowed.

Is there a difference between the terms interest and interest rate? No. Interest is simply a shorthand version of interest rate. Yes. Interest refers to the return that capital earns, whereas interest rate is the payment to someone who lends money to someone else. Yes. Interest is what one earns by placing funds in a savings account, whereas interest rate is the rate that the U.S. Treasury pays for borrowed funds when the government incurs a deficit. Yes. Interest is a dollar payment for the use of funds, whereas interest rate is the ratio of that dollar amount to the total amount of funds borrowed.

labor and capital.

Land can earn economic rent, and so can labor and capital. labor. capital. none of the above

entrepreneurs who bear the risks of production.

Profits are income to owners of capital. all factors of production in a profitable firm. owners of land. entrepreneurs who bear the risks of production.

all of the above

Profits may exist as the result of uncertainty. alertness to arbitrage opportunities. innovation. all of the above

True

The administrative costs per dollar are lower for a large loan than for a small loan. True or False

downward sloping.

The demand for loanable funds curve is upward sloping. downward sloping. perfectly elastic. perfectly inelastic.

by the demand for and supply of loanable funds.

The equilibrium interest rate is determined by the demand for loanable funds. by the supply of loanable funds. by the demand for and supply of loanable funds. independently of the demand for and supply of loanable funds.

False

The only resource that cannot earn economic rent is labor. True or False

people's saving and newly created money.

The supply of loanable funds depends most directly on investment expenditures. people's saving and newly created money. bond and stock activity. the profits of firms.

the current worth of some future dollar amount of income.

The term "present value" refers to how much something costs today relative to what it could be sold for in the future after it depreciates in value. how much you would be willing to pay for a good today if you are not sure that the good will be available in the future. the current worth of some future dollar amount of income. how much your savings are worth today after having been invested for a certain number of years.

False

The terms interest and interest rate are synonyms. True or False

loanable funds and the return earned by capital as an input in the production process.

The two ways in which the word "interest" is used in economics are as the price for loanable funds and the return earned by entrepreneurship. loanable funds and the return earned by capital as an input in the production process. money and the return for risk taking. loanable funds and the return for risk taking.

exists when the probability of a given event cannot be estimated.

Uncertainty is the result of economic rent seeking.index. is the same thing as risk. exists when the probability of a given event can be estimated. exists when the probability of a given event cannot be estimated.

True

Without savers, there would be no supply of loanable funds. True or False