Macro Homework 5: Loanable Funds Model

When the government runs a​ deficit, which of the following is​ true? A. T​ < G​ + TR B. G​ > T​ + TR C. T​ > TR minus− G D. G​ > TR minus− T

A. T​ < G​ + TR

Using the market for loanable​ funds, which of the following has the potential to raise the real interest​ rate? A. an increase in the demand for loanable funds B. an increase in the quantity of loanable funds demanded C. an increase in the quantity of loanable funds supplied D. an increase in the supply of loanable funds

A. an increase in the demand for loanable funds

Which of the following will increase the real interest​ rate? A. an increase in the demand for loanable funds B. an increase in the budget surplus C. an increase in household saving D. an increase in the supply of loanable funds

A. an increase in the demand for loanable funds

​If, in a closed​ economy, real GDP is​ $30 billion, consumption is​ $20 billion, and government purchases are​ $5 billion, what is total saving in the​ economy? A. ​$5 billion B. ​$15 billion C. ​$45 billion D. ​$55 billion

A. ​$5 billion

The financial system of a country is important for​ long-run economic growth because A. firms that use the financial system predominantly are being reckless. B. firms need the financial system to acquire funds from households. C. people can increase their wealth very quickly under a healthy financial system. D. most firms rely on their own retained earnings and do not use the financial system.

B. firms need the financial system to acquire funds from households

The loanable funds market is given in the figure above. If the current real interest rate is 5​ percent, which of the following is​ true? A. There is a shortage of loanable funds in the market. B. The loanable funds market is in equilibrium. C. There is a surplus of loanable funds in the market. D. The quantity of loanable funds being demanded in the market is less than​ $90 million.

C. There is a surplus of loanable funds in the market.

If technological change increases the profitability of new investment for​ firms, then the​ ________ curve for loanable funds will shift to the​ ________ and the equilibrium real interest rate will​ ________. A. ​supply; left; rise B. ​demand; left; fall C. ​demand; right; rise D. ​supply; right; fall

C. ​demand; right; rise

An increase in the government budget surplus will shift the​ ________ curve for loanable funds to the​ ________ and the equilibrium real interest rate will​ ________. A. ​demand; left; fall B. ​demand; right; rise C. ​supply; right; fall D. ​supply; left; rise

C. ​supply; right; fall

An increase in the real interest rate does which of the​ following? A. reduces the demand for loanable funds B. reduces saving C. increases the demand for loanable funds D. reduces consumption spending

D. reduces consumption spending

An increase in the government budget deficit will shift the​ ________ curve for loanable funds to the​ ________ and the equilibrium real interest rate will​ ________. A. ​demand; right; rise B. ​demand; left; fall C. ​supply; right; fall D. ​supply; left; rise

D. ​supply; left; rise