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