Question 1

The pure rate of interest in economic models is best approximated by the

Accepted Answer

A)  1-month Treasury bills.
B)  prime interest rate.
C)  federal funds rate.
D)  20-year Treasury bond rate.E) B) and C)
F) None of the above

Question 2

Usury laws will result in a shortage of loanable funds and nonmarket rationing in credit markets.

Accepted Answer

A) True 
 B)False

Question 3

There will be pressure on the interest rate for loanable funds to increase when

Accepted Answer

A)  supply increases.
B)  demand decreases.
C)  quantity supplied exceeds quantity demanded.
D)  quantity demanded exceeds the quantity supplied.E) B) and C)
F) A) and C)

Question 4

Which of the following is not a component of the demand for loanable funds?

Accepted Answer

A)  household purchases of housing and durable consumer goods
B)  business purchases of capital goods
C)  government financing of the public debt
D)  household savingE) All of the above
F) C) and D)

Question 5

The supply of loanable funds is an upward-sloping curve because the

Accepted Answer

A)  higher the interest rate, the more households consume and the more households save.
B)  higher the interest rate, the less households consume and the more households save.
C)  lower the interest rate, the more households consume and the more households save.
D)  lower the interest rate, the less households consume and the more households save.E) C) and D)
F) A) and B)

Question 6

The real rate of interest is the interest rate

Accepted Answer

A)  charged on long-term government bonds.
B)  associated with a riskless loan.
C)  that large commercial banks charge their best customers.
D)  after adjustment has been made for inflation.E) None of the above
F) A) and B)

Question 7

The demand for land is

Accepted Answer

A)  perfectly elastic.
B)  perfectly inelastic.
C)  upsloping.
D)  downsloping.E) All of the above
F) A) and C)

Question 8

Suppose that in some year nominal interest rates are less than the rate of inflation.This means that

Accepted Answer

A)  money demand exceeds money supply.
B)  real interest rates are negative.
C)  real interest rates are positive and unusually high.
D)  real interest rates exceed nominal interest rates.E) None of the above
F) A) and D)

Question 9

Economists claim that a farmer who owns her land, provides all her own labor, and calculates her profits from the farm by subtracting explicit costs from total revenues will

Accepted Answer

A)  overstate her accounting profits.
B)  understate her accounting profits.
C)  overstate her economic profits.
D)  understate her economic profits.E) B) and C)
F) All of the above

Question 10

The prices paid to a productive resource usually perform an incentive function except with what resource?

Accepted Answer

A)  land
B)  labor
C)  capital
D)  entrepreneurial abilityE) All of the above
F) None of the above

Question 11

(Consider This)  Entrepreneurs' focus on profit encourages efficiency

Accepted Answer

A)  at the expense of employees.
B)  except in a market system.
C)  when properly regulated by the government.
D)  by encouraging the entrepreneur to use the MB = MC rule for every aspect of the business.E) None of the above
F) A) and B)

Question 12

Economic profit might result from

Accepted Answer

A)  easy entry into industries.
B)  dynamic change and uncertainty.
C)  X-inefficiency.
D)  a decline in entrepreneurship.E) A) and D)
F) A) and C)

Question 13

An increase in the expected rates of return on investments would most likely increase the supply of loanable funds.

Accepted Answer

A) True 
 B)False

Question 14

Henry George claimed that land-rent taxes would not impair economic efficiency because

Accepted Answer

A)  they do not result in a change in the amount of land available.
B)  landowners are, as a group, financially secure and able to pay the taxes.
C)  the supply of land is infinitely elastic.
D)  rents represent a small part of income paid to American resource suppliers, so taxes on wages and salaries are more disruptive.E) A) and B)
F) None of the above

Question 15

The supply curve for a productive resource wherein price provides an incentive function is

Accepted Answer

A)  vertical.
B)  horizontal.
C)  upward sloping to the right.
D)  downward sloping to the right.Accessibility: Keyboard Navigation Blooms: UnderstandE) A) and C)
F) A) and B)

Question 16

Which of the following will increase the supply of loanable funds? An increase in the

Accepted Answer

A)  rates of return on potential investments.
B)  productivity of business firms.
C)  demand for business products.
D)  savings of households.Difficulty: 02 MediumE) None of the above
F) A) and B)

Question 17

"Proprietor's income" refers to income received by

Accepted Answer

A)  corporate executives.
B)  owners of small, unincorporated enterprises.
C)  workers hired by small businesses.
D)  interns in businesses.E) A) and D)
F) A) and C)

Question 18

The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years from now.

Accepted Answer

A) True 
 B)False

Question 19

The supply curve of loanable funds is upsloping because

Accepted Answer

A)  businesses find more investments to be profitable at low interest rates than at high interest rates.
B)  government budget deficits vary inversely with the equilibrium interest rate.
C)  households are willing to save more at high interest rates than they are at low interest rates.
D)  banks lend more at low interest rates than they do at high interest rates.E) A) and B)
F) A) and D)

Question 20

Other things equal, the shorter the loan period and the larger the loan size, the higher is the interest rate charged by the lender.

Accepted Answer

A) True 
 B)False

Exam 18: Rent, Interest, and Profit

(Consider This) Entrepreneurs' focus on profit encourages efficiency

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Henry George claimed that land-rent taxes would not impair economic efficiency because

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The supply curve for a productive resource wherein price provides an incentive function is

Correct AnswerverifiedShow Answer

The pure rate of interest in economic models is best approximated by the

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The demand for land is

Correct AnswerverifiedShow Answer

Other things equal, the shorter the loan period and the larger the loan size, the higher is the interest rate charged by the lender.

Correct AnswerverifiedShow Answer

The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years from now.

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The real rate of interest is the interest rate

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There will be pressure on the interest rate for loanable funds to increase when

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Which of the following is not a component of the demand for loanable funds?

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Which of the following will increase the supply of loanable funds? An increase in the

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Economic profit might result from

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The prices paid to a productive resource usually perform an incentive function except with what resource?

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An increase in the expected rates of return on investments would most likely increase the supply of loanable funds.

Correct AnswerverifiedShow Answer

Suppose that in some year nominal interest rates are less than the rate of inflation.This means that

Correct AnswerverifiedShow Answer

The supply curve of loanable funds is upsloping because

Correct AnswerverifiedShow Answer

The supply of loanable funds is an upward-sloping curve because the

Correct AnswerverifiedShow Answer

Economists claim that a farmer who owns her land, provides all her own labor, and calculates her profits from the farm by subtracting explicit costs from total revenues will

Correct AnswerverifiedShow Answer

Usury laws will result in a shortage of loanable funds and nonmarket rationing in credit markets.

Correct AnswerverifiedShow Answer

"Proprietor's income" refers to income received by

Correct AnswerverifiedShow Answer

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