Question 1

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

Question 2

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) All of the above
F) None of the above

Question 3

The rent paid for the pasture land used to graze cattle would increase if:

Accepted Answer

A)   the productivity of the land increased.
B)   people decided to consume more beef.
C)   oil deposits were discovered on the land.
D)   any of these occurred.E) A) and B)
F) C) and D)

Question 4

A lower equilibrium interest rate:

Accepted Answer

A)   increases saving,reduces total spending,and increases total output.
B)   decreases saving,increases total spending,and decreases total output.
C)   increases investment,increases total spending,and increases total output.
D)   decreases investment,decreases total spending,and increases total output.E) All of the above
F) B) and C)

Question 5

The "time-value of money" refers to the fact that:

Accepted Answer

A)   a given amount of money becomes more valuable over time.
B)   a given amount of money is more valuable the sooner it is obtained.
C)   people expect monetary compensation for their labor time.
D)   a given amount of money today is equivalent to a smaller amount of money in the future.E) A) and B)
F) C) and D)

Question 6

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

Question 7

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

Question 8

Which of the following is correct?

Accepted Answer

A)   Although land has no production cost from society's viewpoint,rental payments are costs to individual producers.
B)   Land rent is not a cost to either society or individual producers.
C)   Although land rent is a cost from society's viewpoint,it is not a cost to individual producers.
D)   Land rent is a cost to both society and individual producers.E) B) and C)
F) A) and D) A

Question 9

Economic profits are the salaries received by the hired managers of business corporations.

Accepted Answer

A) True 
 B)False

Question 10

The future value of $3,000 deposited today at 5 percent interest is $3,646.52 four years from now.

Accepted Answer

A) True 
 B)False

Question 11

The marginal revenue product (MRP) of land declines as more land is brought into use.As a result the:

Accepted Answer

A)   demand curve for land is downsloping.
B)   demand curve for land is upsloping.
C)   supply curve for land is downsloping.
D)   supply curve for land is upsloping.E) All of the above
F) B) and C)

Question 12

Unlike most demand curves,the demand curve for loanable funds is upsloping.

Accepted Answer

A) True 
 B)False  False

Question 13

Economic rent refers to the price paid for land and other natural resources that:

Accepted Answer

A)   are fixed in total supply.
B)   vary directly with their market prices.
C)   vary inversely with their market prices.
D)   are available in nearly unlimited quantities.E) A) and C)
F) None of the above A

Question 14

Landowners will not receive any rent so long as:

Accepted Answer

A)   there is any tax on land.
B)   the supply and demand curves for land intersect.
C)   the supply curve of land is perfectly inelastic.
D)   the supply curve lies entirely to the right of the demand curve.E) B) and D)
F) B) and C)

Question 15

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 16

The equilibrium interest rate:

Accepted Answer

A)   allocates the available supply of loanable funds to investment projects that have high enough rates of return to justify the borrowing.
B)   rises when the supply of loanable funds increases.
C)   is the price paid for the use of any resource.
D)   affects the size of total output but not the composition of that output.E) A) and B)
F) B) and D)

Question 17

In the market for loanable funds:

Accepted Answer

A)   an increase in available bank lending will increase the interest rate.
B)   a decrease in saving will reduce the interest rate.
C)   an increase in borrowing for investment will increase the interest rate.
D)   a decrease in government borrowing will increase the interest rate.E) B) and C)
F) B) and D)

Question 18

Which of the following statements best illustrates the time-value of money concept?

Accepted Answer

A)   Bob is willing to forgo receiving $100 today in order to receive $110 next month.
B)   Tom is indifferent between receiving $50 now and receiving $50 six months from now.
C)   Terry works for an hourly wage instead of a fixed salary.
D)   Jeff would prefer to receive $200 at the end of the year instead of $220 now.E) None of the above
F) All of the above

Question 19

Which of the following is incorrect?

Accepted Answer

A)   The nominal interest rate is the rate of interest expressed in terms of current dollars.
B)   The real interest rate is the rate of interest expressed in terms of dollars of constant or inflation-adjusted value.
C)   The nominal interest rate is the real interest rate less the rate of inflation.
D)   During periods of inflation,the nominal interest rate will exceed the real interest rate.E) None of the above
F) C) and D)

Question 20

The amount to which some current amount of money will grow as interest compounds over time is known as:

Accepted Answer

A)   the future value of that sum of money.
B)   the present value of that sum of money.
C)   compound interest.
D)   the time-value of money.E) A) and C)
F) A) and B)

Exam 17: Rent Interest and Profit

Economic or pure rent is:

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The real interest rate can be estimated by:

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The rent paid for the pasture land used to graze cattle would increase if:

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A lower equilibrium interest rate:

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The "time-value of money" refers to the fact that:

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

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The pure rate of interest is approximated by the:

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Which of the following is correct?

Correct AnswerverifiedA

Economic profits are the salaries received by the hired managers of business corporations.

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The future value of $3,000 deposited today at 5 percent interest is $3,646.52 four years from now.

Correct AnswerverifiedShow Answer

The marginal revenue product (MRP) of land declines as more land is brought into use.As a result the:

Correct AnswerverifiedShow Answer

Unlike most demand curves,the demand curve for loanable funds is upsloping.

Correct AnswerverifiedFalse

Economic rent refers to the price paid for land and other natural resources that:

Correct AnswerverifiedA

Landowners will not receive any rent so long as:

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

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The equilibrium interest rate:

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In the market for loanable funds:

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Which of the following statements best illustrates the time-value of money concept?

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Which of the following is incorrect?

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The amount to which some current amount of money will grow as interest compounds over time is known as:

Correct AnswerverifiedShow Answer

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False

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