Econ Chapter 9
Which of the following statements is NOT true? (id:08 Financial System-q9-C) Interest rates and bond prices move inversely with each other. A longer term to maturity exposes a bond holder to greater interest rate risk. Correct! Corporate bonds have no interest rate risk in the long run. Arbitrage keeps interest rates on equally risky assets the same.
C
What would happen to the equilibrium interest rate and quantity of loans if individuals become less willing to save?
The interest rate would increase and the quantity of loans would decrease
What would happen to the equilibrium interest rate and quantity of loans if the government increases the tax rate on interest income?
The interest rate would increase and the quantity of loans would decrease
What would happen to the equilibrium interest rate and quantity of loans if investors expect a large boom to the economy?
The interest rate would increase and the quantity of loans would increase
If income and consumption are equal, saving must be: (id:08 Financial System-q1-N)
Zero
Which of the following is an example of a financial intermediary? ommercial banks You Answered commercial banks, the bond market, and the stock market the bond market the stock market
a
Which of the following would casuse the supply of loanable funds to shift left
a decrease in the supply of loanable funds
Which of the following would cause the interest rate to increase and the quantity of loans to decrease in the market for loanable funds? (id:08 Financial System-q14-C-o)
a decrease in the supply of loanable funds
Why is the demand for loanable funds downward sloping
More people borrow money when interest rates are low than when they are high.
Why is the demand for loanable funds downward sloping?
More people borrow money when interest rates are low than when they are high.
Junk bonds are bonds:
Rated lower than BBB-
What would happen to the equilibrium interest rate and quantity of loans if an increase in the supply of loanable funds?
The interest rate would decrease and the quantity of loans would increase
something of value that by agreement becomes the property of the lender if the borrower defaults is called: (id:08 Financial System-q8-E)
collateral
Crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and causes:
consumption and private investment to fall.
The demand to borrow function is
downward sloping
A surplus of savings in the loanable funds market will: (id:08 Financial System-q6-E)
drive market interest rates down.
What is an example of impatience in economic behavior? (id:08 Financial System-q5-H)
eating a healthy diet every day asking for your grade right after finishing a test insisting on getting a physical exam every year Correct! taking the first job you are offered
What is a service that banks specialize in providing? (id:08 Financial System-q7-G)
evaluating the quality of investment opportunities
Which of the following would cause the interest rate to decrease and the quantity of loans to decrease in the market for loanable funds?
investors become less optimistic about the economy
All else being equal, a working-age person who has more patience tends to have: (id:08 Financial System-q5-F)
more savings
The supply of savings is positively sloped because: (id:08 Financial System-q2-E)
people are enticed to forgo consumption when interest rates are higher.
What causes supply of loanable funds to shift left?
price changes in the economy make investments less profitable
An increase in government borrowing will cause the interest rate to: (id:08 Financial System-q10-D)
rise and private spending to fall.
Which of the following would cause the interest rate to increase and the quantity of loans to decrease in the market for loanable funds? (id:08 Financial System-q14-C-p)
savers become more impatient, increasing their rate of time preference
Which of the following would casuse the supply of loanable funds to shift from S to S new?(right)
savers become more patient, lowering their rate of time preference
The decrease in private consumption and investment that occurs when the government borrows more is called:
the crowding-out effect.
Time preference is:
the desire to have goods and services sooner rather than later (all other things being equal).
Which of the following would cause the interest rate to increase and the quantity of loans to increase in the market for loanable funds? (id:08 Financial System-q14-C-c)
the government introduces a new investment tax credit
Which of the following would casuse the supply of loanable funds to shift from S to S new? (id:08 Financial System-q14-A-m)(right)
the government stops taxing interest income
In reference to the consumption-smoothing theory, a person typically saves the most: (id:08 Financial System-q4-L)
working years
Which of the following do economists consider an investment? (id:08 Financial System-q1-E) the construction of a new factory the purchase of stocks the purchase of bonds the acquisition of gold
A
