Question 1

"Pure rate of interest" refers to the interest rate that

Accepted Answer

A)  borrowers pay to lenders in their own family or circle of close friends.
B)  serves solely as payment to lenders for giving up current use of their funds.
C)  is the difference between the actual rate and the theoretical rate.
D)  measures the compensation to lenders for taking on the risks involved.E) A) and C)
F) A) and B)

Question 2

The table shows the projected rate of return and number of investment projects that might be undertaken by a small firm. Each project requires an investment of $1,000. If the interest rate decreases from 25 percent to 20 percent, the quantity of loanable funds demanded by this firm

Accepted Answer

A)  increases by $1,000.
B)  increases by $3,000.
C)  decreases by $3,000.
D)  decreases by $4,000.E) B) and C)
F) A) and C)

Question 3

Which of the following resource payments is considered by economists as surplus payments?

Accepted Answer

A)  wages for labor
B)  rent for land
C)  interest for capital
D)  profits for entrepreneurshipE) All of the above
F) B) and C)

Question 4

If Kelly deposits $10,000 into an account that pays 8 percent interest, compounded annually, and she makes no further deposits or withdrawals, how much will Kelly have in her account at the end of 5 years?

Accepted Answer

A)  $14,000
B)  $14,482
C)  $14,693
D)  $15,000E) B) and D)
F) None of the above

Question 5

If a factor of production has no production cost and has a fixed supply, then payments to that factor constitute what economists call

Accepted Answer

A)  abnormal profits.
B)  economic rent.
C)  normal profits.
D)  interest payments.E) C) and D)
F) None of the above

Question 6

Which of the following is a source of insurable business risk?

Accepted Answer

A)  changes in consumer tastes
B)  changes in government policies
C)  economic recession
D)  accidents to employeesE) A) and B)
F) A) and C)

Question 7

Which would usually not be an entrepreneurial function?

Accepted Answer

A)  introducing a new product in a business
B)  assuming uninsurable risks of owning a business
C)  combining and directing resources in an uncertain business environment
D)  managing the accounting department of a Fortune 500 corporationE) C) and D)
F) A) and D)

Question 8

Refer to the table representing Darcy's bank account. If she deposited $1,000 into her account at the beginning of year 1 and made no further deposits or withdrawals, which cell(s) represents the future value(s) of the initial deposit if the money remains in the account for three years?

Accepted Answer

A)  cell B only
B)  cell A only
C)  cells A and D
D)  cells B and CE) A) and C)
F) A) and D)

Question 9

Some economists advocate taxes on land because such taxes

Accepted Answer

A)  do not affect the supply of land.
B)  increase the supply of land.
C)  improve the allocation of land by shifting it from low-productivity to high-productivity uses.
D)  have a positive incentive function.E) A) and B)
F) None of the above

Question 10

Refer to the table, in which the values for columns (2) through (5) are in acres. If the relevant columns are (1) , (2) , and (5) , land rent will be

Accepted Answer

A)  $200 per acre.
B)  $0 per acre.
C)  $300 per acre.
D)  $100 per acre.E) B) and C)
F) All of the above

Question 11

Broadly defined, labor's share of national income has been remarkably stable since 1900.

Accepted Answer

A) True 
 B)False

Question 12

If you pay $2,640 annually on a $22,000 loan A, and pay $1,800 on a $12,000 loan B, then the interest rates are

Accepted Answer

A)  12 percent on loan A and 18 percent on loan B.
B)  10 percent on loan A and 15 percent on loan B.
C)  12 percent on loan A and 15 percent on loan B.
D)  15 percent on loan A and 12 percent on loan B.E) None of the above
F) A) and B)

Question 13

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) None of the above
F) A) and C)

Question 14

The table applies to a loan with an interest rate of 5 percent per period. What value goes in the cell labeled X?

Accepted Answer

A)  $2,200
B)  $2,315.25
C)  $2,210
D)  $2,205E) A) and B)
F) C) and D)

Question 15

Profits account for a smaller share of total U.S. income than rents.

Accepted Answer

A) True 
 B)False

Question 16

Refer to the graph of the supply and demand for loanable funds. A limit of 10 percent on the interest rate that banks can charge for loans will

Accepted Answer

A)  have an equal effect on borrowers and lenders.
B)  save borrowers 5 percent and cost lenders 5 percent on the amount loaned.
C)  give lenders a premium of 5 percent and cost borrowers 5 percent on the amount loaned.
D)  save borrowers 10 percent and cost lenders 10 percent on the amount loaned.E) A) and C)
F) None of the above

Question 17

Economic rent, or pure rent, is

Accepted Answer

A)  a payment made for the use of housing, factory buildings, or capital goods.
B)  a payment for resources used in the production of "free goods."
C)  a payment for the use of those resources whose supply is perfectly elastic.
D)  the price paid for the use of land and other nonreproducible resources.E) All of the above
F) None of the above

Question 18

The real interest rate can be estimated by

Accepted Answer

A)  subtracting the pure interest rate from the nominal interest rate.
B)  dividing the nominal interest rate by the consumer price index.
C)  subtracting the nominal interest rate from the rate of inflation.
D)  subtracting the rate of inflation from the nominal interest rate.E) A) and B)
F) B) and C)

Question 19

Other things equal, an increase in the equilibrium interest rate will

Accepted Answer

A)  increase R&D spending.
B)  rise when the supply of loanable funds increases.
C)  decrease purchases of capital goods and reduce R&D spending.
D)  increase bank lending.E) None of the above
F) B) and C)

Question 20

Economic profits are the entrepreneur's reward for taking on the insurable risks of running a business.

Accepted Answer

A) True 
 B)False

Exam 18: Rent, Interest, and Profit

The table applies to a loan with an interest rate of 5 percent per period. What value goes in the cell labeled X?

Correct AnswerverifiedShow Answer

Refer to the table representing Darcy's bank account. If she deposited $1,000 into her account at the beginning of year 1 and made no further deposits or withdrawals, which cell(s) represents the future value(s) of the initial deposit if the money remains in the account for three years?

Correct AnswerverifiedShow Answer

Economic profits are the entrepreneur's reward for taking on the insurable risks of running a business.

Correct AnswerverifiedShow Answer

Economic rent, or pure rent, is

Correct AnswerverifiedShow Answer

Broadly defined, labor's share of national income has been remarkably stable since 1900.

Correct AnswerverifiedShow Answer

If Kelly deposits $10,000 into an account that pays 8 percent interest, compounded annually, and she makes no further deposits or withdrawals, how much will Kelly have in her account at the end of 5 years?

Correct AnswerverifiedShow Answer

"Pure rate of interest" refers to the interest rate that

Correct AnswerverifiedShow Answer

The table shows the projected rate of return and number of investment projects that might be undertaken by a small firm. Each project requires an investment of $1,000. If the interest rate decreases from 25 percent to 20 percent, the quantity of loanable funds demanded by this firm

Correct AnswerverifiedShow Answer

Other things equal, an increase in the equilibrium interest rate will

Correct AnswerverifiedShow Answer

Other things equal, interest rates are

Correct AnswerverifiedShow Answer

Some economists advocate taxes on land because such taxes

Correct AnswerverifiedShow Answer

Which of the following resource payments is considered by economists as surplus payments?

Correct AnswerverifiedShow Answer

If a factor of production has no production cost and has a fixed supply, then payments to that factor constitute what economists call

Correct AnswerverifiedShow Answer

Which would usually not be an entrepreneurial function?

Correct AnswerverifiedShow Answer

The real interest rate can be estimated by

Correct AnswerverifiedShow Answer

Which of the following is a source of insurable business risk?

Correct AnswerverifiedShow Answer

Profits account for a smaller share of total U.S. income than rents.

Correct AnswerverifiedShow Answer

If you pay $2,640 annually on a $22,000 loan A, and pay $1,800 on a $12,000 loan B, then the interest rates are

Correct AnswerverifiedShow Answer

Refer to the table, in which the values for columns (2) through (5) are in acres. If the relevant columns are (1) , (2) , and (5) , land rent will be

Correct AnswerverifiedShow Answer

Refer to the graph of the supply and demand for loanable funds. A limit of 10 percent on the interest rate that banks can charge for loans will

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified