Question 1

In time-value of money calculations, discounting is the reverse of compounding.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)   rent
B)   money
C)   interest
D)   capitalE) All of the above
F) B) and C)

Question 4

Labor's share of income earned by Americans is smaller than the share of capital.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Defined narrowly as wages and salaries, labor's share of the national income is about

Accepted Answer

A)   70 percent.
B)   53 percent.
C)   42 percent.
D)   89 percent.E) C) and D)
F) B) and C)

Question 7

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) C) and D)
F) A) and B)

Question 8

The demand for farmland will increase if

Accepted Answer

A)   the demand for food decreases.
B)   technological advances make land more productive.
C)   the price of farm labor increases and the output effect exceeds the substitution effect.
D)   the supply of farmland increases.E) A) and D)
F) C) and D)

Question 9

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 10

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) A) and B)
F) A) and C)

Question 11

The pure rate of interest is approximated by the

Accepted Answer

A)   rate that savings and loan associations charge on mortgage loans.
B)   rate charged consumers by credit card companies.
C)   rate paid on long-term government bonds.
D)   announced rate at which commercial banks make business loans.E) A) and B)
F) A) and C)

Question 12

If the payment to an input is pure economic rent, then reducing that payment will

Accepted Answer

A)   not influence the availability of the input.
B)   increase the quantity supplied of the input.
C)   decrease the quantity supplied of the input.
D)   decrease the demand for the input.E) A) and B)
F) A) and C)

Question 13

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) B) and D)
F) B) and C)

Question 14

Effective usury laws cause

Accepted Answer

A)   a surplus of money in money markets.
B)   the quantity of money demanded to be brought into balance with the quantity supplied.
C)   the quantity of money supplied to exceed the quantity demanded.
D)   a shortage of money in money markets.E) All of the above
F) B) and C)

Question 15

In his book Progress and Poverty, Henry George argued that

Accepted Answer

A)   poverty is associated with the personal characteristics of individuals and therefore cannot be remedied by government antipoverty programs.
B)   economic rent could be heavily taxed without impairing the supply of land or, therefore, the productive capacity of the economy.
C)   rents should not be taxed, because rental income is the basic source of saving, which ultimately permits a high level of investment and economic growth.
D)   taxes on rents are undesirable because they have a severe disincentive effect on landlords.E) C) and D)
F) B) and D)

Question 16

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 B)
F) A) and C)

Question 17

If the inflation rate is 10 percent, what is a bank's real rate of return on a loan of $100 at 10 percent interest?

Accepted Answer

A)   $100
B)   $10
C)   10 percent
D)   0 percentE) A) and C)
F) A) and D)

Question 18

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) A) and C)
F) B) and D)

Question 19

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

Question 20

Which of the following represents an uninsurable risk to a business firm?

Accepted Answer

A)   the possibility that its warehouse will burn down
B)   the possibility that several of its workers will be injured at work
C)   the possibility that an adverse change in consumer tastes will decrease the demand for the firm's product
D)   the possibility that a tornado will damage the plant and stop production for a monthE) A) and D)
F) None of the above

Exam 18: Rent, Interest, and Profit

The pure rate of interest is approximated by the

Correct AnswerverifiedShow Answer

In his book Progress and Poverty, Henry George argued that

Correct AnswerverifiedShow Answer

Labor's share of income earned by Americans is smaller than the share of capital.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the inflation rate is 10 percent, what is a bank's real rate of return on a loan of $100 at 10 percent interest?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The real interest rate can be estimated by

Correct AnswerverifiedShow Answer

The demand for farmland will increase if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the payment to an input is pure economic rent, then reducing that payment will

Correct AnswerverifiedShow Answer

Effective usury laws cause

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

In time-value of money calculations, discounting is the reverse of compounding.

Correct AnswerverifiedShow Answer

Defined narrowly as wages and salaries, labor's share of the national income is about

Correct AnswerverifiedShow Answer

Effective usury laws cause

Correct AnswerverifiedShow Answer

Which of the following represents an uninsurable risk to a business firm?

Correct AnswerverifiedShow Answer

The real rate of interest is the interest rate

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