Economics help

1. The real interest rate is defined as:

A. inflation minus the nominal interest rate.

B. the nominal interest rate plus inflation.

C. the nominal interest rate divided by inflation.

D. the nominal interest rate minus inflation.

2. The loanable funds theory states that ________ is(are) determined by the ________ for loans.

A. real interest rates; demand

B. nominal interest rates; supply and demand

C. real interest rates; supply and demand

D. inflation; supply

3. In the loanable funds theory, ________ is the ________ of a loan.

A. the nominal interest rate; price

B. inflation; cost

C. the price; interest rate

D. the real interest rate; price

4. Which of the following are assumptions of the loanable funds theory?

I. There is only one type of loan.

II. The interest rate is zero.

III. Banks are the intermediary between savers and investors.

A. I only

B. II only

C. III only

D. I and III

5. Which of the following are assumptions of the loanable funds theory?

I. There are many types of loans.

II. There is only one interest rate.

III. Savers loan to investors via banks.

A. I only

B. II only

C. III only

D. I and III

6. Which of the following are assumptions of the loanable funds theory?

I. There are several types of loans.

II. There are many different interest rates.

III. Banks are the intermediary between savers and investors.

A. II only

B. I only

C. III only

D. None of the answers are correct.

7. In the loanable funds model, savers and investors:

A. use a bank for making loans.

B. never meet each other.

C. meet directly in a market for loans.

D. put loans into a lockbox and borrow from it.

8. In the loanable funds theory, investment is the:

A. demand for loans.

B. supply for loans.

C. interest rate.

D. rate of capital depreciation.

9. Figure 4.1: The Loanable Funds Market

Reference: Ref 4-1

(Figure 4.1: The Loanable Funds Market) If firms believe the economy will begin to pick up in the future, the ________ of(for) loanable funds will shift from ________ and the real interest rate will ________.

A. demand; D2 to D1; rise

B. demand; D2 to D1; fall

C. supply; S1 to S2; rise

D. supply; S2 to S1; fall

10. Figure 4.1: The Loanable Funds Market

Reference: Ref 4-1

(Figure 4.1: The Loanable Funds Market) If there is an increase in government expenditure without a similar increase in taxes, the ________ of(for) loanable funds will shift from ________ and the real interest rate will ________.

A. demand; D1 to D2; fall

B. supply; S1 to S2; rise

C. supply; S2 to S1; fall

D. There is not enough information provided to answer this question.

11. A decline in foreign saver confidence will shift the loanable funds ________ curve to the ________ and the real interest rate will ________.

A. supply; left; rise

B. demand; left; fall

C. supply; right; fall

D. demand; right; rise

12. A decline in investor confidence will shift the loanable funds ________ curve to the ________ and the real interest rate will ________.

A. supply; left; rise

B. supply; right; fall

C. demand; right; rise

D. demand; left; fall

13. With baby boomers starting to retire soon we will see a shift in the loanable funds ________ curve to the ________ and the real interest rate will ________.

A. demand; right; rise

B. demand; left; fall

C. supply; left; rise

D. supply; right; fall

14. An increase in the budget deficit will shift the loanable funds ________ curve to the ________ and the real interest rate will ________.

A. supply; right; fall

B. supply; left; rise

C. demand; right; rise

D. There is not enough information provided to answer this question.

15. Figure 4.1: The Loanable Funds Market

Reference: Ref 4-1

(Figure 4.1: The Loanable Funds Market) If the government offers a new tax-free retirement account, ________ rises, the ________ of(for) loanable funds will shift from ________, and the real interest rate will ________.

A. capital inflow; supply; S2 to S1; rise

B. private savings; supply; S2 to S1; fall

C. public savings; supply; S2 to S1; rise

D. total savings; demand; D1 to D2; rise

16. The Fisher equation states that the ________ is equal to _________.

A. nominal interest rate; the real interest rate plus the rate of inflation

B. nominal interest rate; the real interest rate minus the expected rate of inflation

C. nominal interest rate; the real interest rate plus the expected rate of inflation

D. misery index; inflation plus the unemployment rate

17. If i is the nominal interest rate, r is the real interest rate, ? is inflation, and ?e is expected inflation, the Fisher equation is written as:

A. i = r + ?

B. i = r + ?e

C. r = i + ?e

D. r = i + ?