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1 | |
The "supply" of loanable funds market is provided by |
| | A) | savers. |
| | B) | borrowers. |
| | C) | businesses that invest. |
| | D) | consumers that buy on time. |
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2 | |
The "demand" side of the loanable funds market is provided by |
| | A) | savers. |
| | B) | borrowers. |
| | C) | businesses that buy government debt. |
| | D) | consumers that buy corporate bonds. |
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3 | |
The equilibrium interest rate is such that |
| | A) | the amount borrowers wish to borrow equals the amount savers wish to save. |
| | B) | the amount borrowers wish to borrow is greater than the amount savers wish to save. |
| | C) | the amount borrowers wish to borrow is less than the amount savers wish to save. |
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4 | |
If consumer confidence rises and causes them to be more willing to borrow this will cause the |
| | A) | demand for loanable funds to rise which will raise interest rates. |
| | B) | demand for loanable funds to rise which will lower interest rates. |
| | C) | supply of loanable funds to rise which will raise interest rates. |
| | D) | supply of loanable funds to rise which will lower interest rates. |
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5 | |
If the Federal Reserve adds money to the supply of loanable funds this will |
| | A) | cause interest rates to fall. |
| | B) | cause interest rates to rise. |
| | C) | cause the demand for loanable funds to rise. |
| | D) | cause the demand for loanable funds to fall. |
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6 | |
The nominal interest rate |
| | A) | includes only the compensation for expected inflation. |
| | B) | includes only the compensation for waiting on consumption. |
| | C) | includes neither the compensation for expected inflation nor waiting on consumption. |
| | D) | includes both the compensation for expected inflation and waiting on consumption. |
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7 | |
The real interest rate |
| | A) | includes only the compensation for expected inflation. |
| | B) | includes only the compensation for waiting on consumption. |
| | C) | includes neither the compensation for expected inflation nor waiting on consumption. |
| | D) | includes both the compensation for expected inflation and waiting on consumption. |
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8 | |
If a flow of payments to be received in the future is expressed in an equivalent interest-adjusted amount to be received in one amount today this is the |
| | A) | future value. |
| | B) | the present value. |
| | C) | the compensated value. |
| | D) | the real value. |
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9 | |
If a flow of payments to be received in the future sums to $1000 then the present value of this flow will be |
| | A) | much larger than $1000 regardless of the interest rate or when the payments will be received. |
| | B) | exactly equal to $1000 regardless of the interest rate or when the payments will be received. |
| | C) | much less than $1000 regardless of the interest rate or when the payments will be received. |
| | D) | less than $1000 but how much depends on the interest rate or when the payments will be received. |
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10 | |
If a car loan payment is $500 per month for four years at 5% interest then the total amount borrowed will be |
| | A) | much more than $24,000 (48 months*$500 per month). |
| | B) | slightly more than $24,000 (48 months*$500 per month). |
| | C) | less than $24,000 (48 months*$500 per month). |
| | D) | equal to $24,000 (48 months*$500 per month). |
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11 | |
If a woman saves $500 per month for four years in an account yielding 4% then in four years then she will have |
| | A) | much less than $24,000 (48 months*$500 per month). |
| | B) | slightly less than $24,000 (48 months*$500 per month). |
| | C) | more than $24,000 (48 months*$500 per month). |
| | D) | equal to $24,000 (48 months*$500 per month). |
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12 | |
If a man were to have won the lottery in which he was entitled to $50,000 a year for 20 years then an increase in the interest rate would cause the present value of his winnings to |
| | A) | fall. |
| | B) | remain unchanged. |
| | C) | rise . |
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13 | |
If a man were to have a choice between $50,000 a year for the next 20 years and $100,000 a year for the next 10 years he would |
| | A) | prefer the $50,000 over 20 years if interest rates were above 10%. |
| | B) | prefer the $50,000 over 20 years if interest rates were below 10%. |
| | C) | prefer the $50,000 over 20 years regardless of interest rates. |
| | D) | prefer the $100,000 over 10 years regardless of interest rates. |
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14 | |
If a man were to have a choice between $50,000 a year for the next 20 years and $100,000 a year for 10 years but the payments would not start for 10 years |
| | A) | prefer the $50,000 over 20 years if interest rates were sufficiently high. |
| | B) | prefer the $100,000 over 10 years (starting in 10 years) if interest rates were sufficiently high. |
| | C) | prefer the $50,000 over 20 years regardless of interest rates. |
| | D) | prefer the $100,000 over 10 years (starting in 10 years) regardless of interest rates. |
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15 | |
If a company were to have the option to buy a machine that would add $100,000 to profit each year for the next 100 years and it would have to pay 5% on the loan to buy it they would buy the machine |
| | A) | regardless of its cost. |
| | B) | as long as it cost less that $10,000,000 (100*$100,000). |
| | C) | as long as it cost less than about $2,000,000. |
| | D) | under no circumstances. |
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2003 McGraw-Hill Higher Education