Exam 22: Savings,interest Rates,and the Market for Loanable Funds

A) a shift from line 1 to line 4
B) a shift from line 4 to line 1
C) a shift from line 2 to line 3
D) movement from A to B
E) a new shortage of loanable funds represented by the distance from C to D

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A) savings to increase.
B) savings to decrease.
C) borrowing to decline.
D) consumption variation to increase.
E) savings as a percentage of income to fall.

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A) the new equilibrium quantity of loanable funds would decrease,but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.
B) the new equilibrium quantity of loanable funds would increase,but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.
C) the new equilibrium quantity of loanable funds would be indeterminate,but we would be certain the new equilibrium interest rate would be higher than the original.
D) the new equilibrium quantity of loanable funds would be indeterminate,but we would be certain the new equilibrium interest rate would be less than the original.
E) based on this information and because both changes would affect the demand for loanable funds in the opposite way,we would be unable to say anything about the relationship of the new equilibrium interest rate and quantity to the original interest rate and quantity.

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A) investment occurs,dollars are borrowed,and output is produced.
B) dollars are borrowed,investment occurs,and output is produced.
C) output is produced,dollars are borrowed,and investment occurs.
D) savings occurs,output is produced,and dollars are borrowed.
E) borrowing occurs,output is produced,and investment occurs.

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A) the vertical axis represents the amount of savings,and the horizontal axis represents the amount of borrowing.
B) the vertical axis represents the interest rate,and the distance between points C and D represents the surplus of loanable funds at interest rate A.
C) the horizontal axis represents the interest rate,and the distance between points C and D represents the shortage of loanable funds.
D) the vertical axis represents the interest rate,and the distance between points C and D represents the shortage of loanable funds at interest rate A.
E) line 1 represents the interest rate,and line 2 represents the quantity of savings.

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A) in the 1960s.
B) in the 1950s during the great U.S.hyperinflation.
C) at the end of the 1970s and in the early 1980s.
D) during the Great Recession of 2007-2009.
E) in the 1990s.

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A) the opportunity cost of saving.
B) the opportunity cost of consumption.
C) the opportunity cost of saving plus the opportunity cost of inflation.
D) only the opportunity cost of taking a different job.
E) the price of savings but not investment.

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A) time preference to fall and savings to increase.
B) time preference to rise and savings to increase.
C) time preference to fall and savings to decrease.
D) time preference to rise and savings to decrease.
E) interest rates to fall to zero.

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A) quantity of loanable funds to decrease and the equilibrium interest rate to increase.
B) quantity of loanable funds to increase and the equilibrium interest rate to decrease.
C) quantity of loanable funds to increase,but the effect on the equilibrium interest rate would be uncertain.
D) interest rate to increase,but the new equilibrium quantity would be uncertain.
E) interest rate to decrease,but the new equilibrium quantity would be uncertain.

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A) On their 60th birthday,the one who started saving later would have exactly half as much as the one who began saving earlier.
B) On their 60th birthday,they would both have the same amount.
C) On their 60th birthday,the one who started saving later would have less than half the amount that the one who began saving earlier has.
D) On their 60th birthday,the one who started saving later would have received a larger real interest rate,but not enough to "catch up" to the one who began saving earlier.
E) On their 60th birthday,neither would have anything if inflation had been negative during the period.

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A) governments and firms.
B) banks,foreign governments,and bonds.
C) mutual fund firms,stock exchanges,and banks.
D) households and foreign entities.
E) arbitrage companies,banks,and firms.

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The economist John Maynard Keynes coined...

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A) It increases the supply of loanable funds.
B) It decreases the supply of loanable funds.
C) It increases the demand for loanable funds.
D) It decreases the demand for loanable funds.
E) It reduces investor confidence.

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A) cost; return
B) return; cost
C) rate of change; static value
D) static value; rate of change
E) nominal return; real return

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Because of compound interest,it is very ...

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A) the new equilibrium quantity of loanable funds would decrease,but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.
B) the new equilibrium quantity of loanable funds would increase,but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.
C) the new equilibrium quantity of loanable funds would be indeterminate,but we would be certain the new equilibrium interest rate would be higher than the original.
D) the new equilibrium quantity of loanable funds would be indeterminate,but we would be certain the new equilibrium interest rate would be less than the original.
E) based on this information and because both changes would affect the demand for loanable funds in the opposite way,we would be unable to say anything about the relationship of the new equilibrium interest rate and quantity to the original interest rate and quantity.

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A) girl has exchanged high time preferences for low.
B) girl has exchanged low time preferences for high.
C) girl has engaged in consumption smoothing.
D) bookseller has moved from being a lender of loanable funds to a borrower.
E) bookseller has moved from being a borrower to a lender of loanable funds.

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A) supply creates its own investment.
B) first production occurs,then profit represents a residual,and then this residual is saved.
C) firms first invest (which is borrowing) ,then they produce,and then the revenue they receive is used to pay resource suppliers and lenders.
D) firms first save (which is lending) ,then they produce,and then the revenue they receive is used to lend even more.
E) real interest rates rise faster than nominal interest rates because production occurs before income is received by the firm.

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