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Compared to taxes on other resources, taxes on land may be preferable because they: |
| | A) | do not lead to a reallocation of the resource |
| | B) | are proportional to income across all income classes |
| | C) | lead to more rapid economic growth |
| | D) | can increase productive efficiency by reducing the cost of a key input |
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| 2 | |
The economic rent for a particular piece of land will decrease if: |
| | A) | there is an increase in demand for the goods or services produced on the land |
| | B) | a change in technology increases the productivity of the land |
| | C) | a change in property zoning laws restricts the kinds of economic activities that can be conducted on the land |
| | D) | the demand for the land becomes more inelastic |
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| 3 | |
Both money and real capital are economic resources. |
| | A) | True |
| | B) | False |
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| 4 | |
The XYZ Corporation can make a 4% real (inflation-adjusted) return on an investment. It can borrow funds to finance the investment at a nominal rate of 6% and the inflation rate is 1%. We can conclude that the: |
| | A) | investment will be profitable |
| | B) | investment will be unprofitable |
| | C) | real rate of interest is 3% |
| | D) | real rate of interest is 7% |
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| 5 | |
Ranked from highest to lowest, the shares of all income earned by Americans are: |
| | A) | Corporate profit and interest; rent; wages and salaries |
| | B) | Corporate profit and interest; wages and salaries; rent |
| | C) | Wages and salaries; corporate profit and interest; rent |
| | D) | Wages and salaries; rent; corporate profit and interest |
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| 6 | |
Use the following diagram to answer the next question.
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Refer to the diagram. Assuming entry into this industry is blocked, the firm represented in the diagram: |
| | A) | can use its monopoly power to earn an economic profit |
| | B) | will be unable to earn economic profits at any possible price |
| | C) | is earning a normal profit |
| | D) | is earning a normal profit but not an economic profit |
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| 7 | |
If your bank is paying you 1% on your savings deposits and the rate of inflation is 1.5%: |
| | A) | your real rate of interest is 2.5% |
| | B) | your real rate of interest is 0.5% |
| | C) | your real rate of interest is -0.5% |
| | D) | the supply curve of loanable funds must be downward sloping |
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Use the following diagram to answer the next question.
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Refer to the diagram. Suppose the initial demand and supply of loanable funds curves are D0 and S0, respectively. Which of the following would cause a shift to D1? |
| | A) | Increasingly wary of the future, households decide to increase their saving |
| | B) | The productivity of capital goods increases |
| | C) | The real rate of interest declines |
| | D) | The government reduces the size of the deficit |
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Use the following diagram to answer the next question.
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Refer to the diagram. Suppose the initial demand and supply of loanable funds curves are D1 and S1, respectively. If government passes a usury law establishing E as the maximum interest rate that can be charged on loans: |
| | A) | bank owners and other lenders will benefit |
| | B) | both high- and low-income borrowers will likely benefit from the lower interest rate |
| | C) | banks will likely ration the available credit to high-income borrowers |
| | D) | the amount of available credit will increase |
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| 10 | |
The supply curve of loanable funds is: |
| | A) | upward-sloping, because people prefer current to future consumption |
| | B) | upward-sloping, because a higher interest rate reduces the size of the government deficit |
| | C) | downward-sloping, because a lower interest rate makes more investment projects become profitable |
| | D) | perfectly elastic |
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