Question 1

Most borrowers value money for

Accepted Answer

A)  its own sake.
B)  what it can buy.
C)  what it can produce.
D)  what they have to pay for it.E) A) and B)
F) B) and D)

Question 2

A unique characteristic of taxes on economic rents is that such taxes

Accepted Answer

A)  stimulate aggregate production.
B)  do not lead to a reallocation of the resource.
C)  are paid by consumers.
D)  are always regressive.E) All of the above
F) A) and B)

Question 3

For a given future value and interest rate, the discounted present value will become larger as the time period gets longer.

Accepted Answer

A) True 
 B)False

Question 4

Other things equal, interest rates are

Accepted Answer

A)  higher on large loans than on small loans.
B)  higher on loans with tax-exempt interest payments.
C)  lower on less risky loans than on riskier loans.
D)  lower on short-term loans than on long-term loans.E) B) and D)
F) A) and C)

Question 5

The supply of loanable funds is perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 6

If the nominal rate of interest is 8 percent and the real rate of interest is 3 percent, the inflation rate must be 11 percent.

Accepted Answer

A) True 
 B)False

Question 7

Effective usury laws cause

Accepted Answer

A)  a surplus in the market for loanable funds.
B)  the quantity of loanable funds demanded to be brought into balance with the quantity supplied.
C)  the quantity of loanable funds demanded to exceed the quantity supplied.
D)  the quantity of loanable funds supplied to exceed the quantity demanded.E) A) and D)
F) A) and C)

Question 8

To an individual firm or landowner, land rents do not appear to be a surplus because

Accepted Answer

A)  land is a productive resource, like the other resources.
B)  a given parcel of land has alternative uses, and rent represents a real cost of production.
C)  they do not understand that the supply of land, in total, is perfectly inelastic.
D)  landowners are, politically and economically, a powerful and well-organized group.E) All of the above
F) C) and D)

Question 9

Henry George advocated a single tax on

Accepted Answer

A)  real capital.
B)  entrepreneurial profits.
C)  land.
D)  labor income.E) A) and C)
F) A) and D)

Question 10

A decrease in the supply of loanable funds would tend to lower the interest rate.

Accepted Answer

A) True 
 B)False

Question 11

Present value is the amount to which some current amount of money will grow as interest compounds over time.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is considered to be an economic resource?

Accepted Answer

A)  rent
B)  money
C)  interest
D)  capitalE) A) and B)
F) A) and C)

Question 13

The basic function of profits and losses is to allocate society's scarce resources to their highest valued uses.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not a source of loanable funds?

Accepted Answer

A)  the saving of households
B)  business saving
C)  commercial bank lending
D)  government budget deficitsE) C) and D)
F) A) and B)

Question 15

In a market system, private ownership of land does not lead to which of the following results?

Accepted Answer

A)  Private owners will face no cost in using land for one purpose rather than another.
B)  Land rent reflects the opportunity cost of land.
C)  Land is allocated to its best possible uses.
D)  Private land ownership aids economic growth because land rents reflect changes in tastes and technologies.E) A) and D)
F) C) and D)

Question 16

Which expression is used to calculate the present value of an amount of money?

Accepted Answer

A)  Future Value × (1 + interest rate) time
B)  Future Value/(1 + interest rate) time
C)  Future Value × (1 + time) interest rate
D)  (1 + interest rate) time/Future ValueE) All of the above
F) B) and C)

Question 17

When the inflation rate is 4 percent and the nominal interest rate on long-term government bonds is 8 percent, the real interest rate is 12 percent.

Accepted Answer

A) True 
 B)False

Question 18

The "future value" of a sum of money refers to

Accepted Answer

A)  the estimated value of that money invested in a stock portfolio at some future date.
B)  the purchasing power of a given amount of money adjusted for price changes.
C)  today's value of a sum of money to be received in the future.
D)  the amount to which some current sum of money will grow over time.E) None of the above
F) A) and D)

Question 19

Henry George's single-tax movement was based on the argument that

Accepted Answer

A)  the tax structure should consist solely of a highly progressive tax on nonwage incomes.
B)  interest is unearned income and should be taxed away by government.
C)  in less-developed countries the supply of and demand for land will be such that land will be a free good and therefore capable of bearing sizable taxes.
D)  a high tax on land rent is justified because land rent performs no incentive function.E) B) and C)
F) A) and C)

Question 20

For a given future value, the higher the interest rate is, the higher the present value will be.

Accepted Answer

A) True 
 B)False

Exam 18: Rent, Interest, and Profit

Most borrowers value money for

Correct AnswerverifiedShow Answer

For a given future value and interest rate, the discounted present value will become larger as the time period gets longer.

Correct AnswerverifiedShow Answer

The supply of loanable funds is perfectly elastic.

Correct AnswerverifiedShow Answer

A decrease in the supply of loanable funds would tend to lower the interest rate.

Correct AnswerverifiedShow Answer

Which of the following is not a source of loanable funds?

Correct AnswerverifiedShow Answer

The basic function of profits and losses is to allocate society's scarce resources to their highest valued uses.

Correct AnswerverifiedShow Answer

If the nominal rate of interest is 8 percent and the real rate of interest is 3 percent, the inflation rate must be 11 percent.

Correct AnswerverifiedShow Answer

When the inflation rate is 4 percent and the nominal interest rate on long-term government bonds is 8 percent, the real interest rate is 12 percent.

Correct AnswerverifiedShow Answer

Other things equal, interest rates are

Correct AnswerverifiedShow Answer

A unique characteristic of taxes on economic rents is that such taxes

Correct AnswerverifiedShow Answer

Henry George advocated a single tax on

Correct AnswerverifiedShow Answer

Which expression is used to calculate the present value of an amount of money?

Correct AnswerverifiedShow Answer

Henry George's single-tax movement was based on the argument that

Correct AnswerverifiedShow Answer

Which of the following is considered to be an economic resource?

Correct AnswerverifiedShow Answer

For a given future value, the higher the interest rate is, the higher the present value will be.

Correct AnswerverifiedShow Answer

To an individual firm or landowner, land rents do not appear to be a surplus because

Correct AnswerverifiedShow Answer

In a market system, private ownership of land does not lead to which of the following results?

Correct AnswerverifiedShow Answer

Present value is the amount to which some current amount of money will grow as interest compounds over time.

Correct AnswerverifiedShow Answer

Effective usury laws cause

Correct AnswerverifiedShow Answer

The "future value" of a sum of money refers to

Correct AnswerverifiedShow Answer

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