978-0133460629 Chapter 10 Part 5

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54) If the disposable income decreases, then

A) the supply of loanable funds increases.

B) the supply of loanable funds decreases.

C) the quantity of loanable funds demanded increases.

D) the quantity of loanable funds supplied decreases.

E) the demand for loanable funds increases.

Skill: Level 1: Deinition

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

55) If expectations about future income change, there is

A) no change in saving until income actually changes.

B) a decrease in saving if people expect income to increase in the future.

C) an increase in saving if people expect income to increase in the future.

D) a decrease saving if people expect income to decrease in the future.

E) a change in the quantity of loanable funds supplied and a movement along the supply of

loanable funds curve.

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

56) If expected future income increases, then

A) the supply of loanable funds increases.

B) the supply of loanable funds decreases.

C) the quantity of loanable funds demanded increases.

D) the quantity of loanable funds supplied decreases.

E) the demand for loanable funds decreases.

Skill: Level 1: Deinition

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

57) In 2008 the fall in the value of the stock market decreased people’s wealth. As a result

of this change alone, the supply of loanable funds

A) increased.

B) did not change, and there was no movement along the supply of loanable funds curve.

C) decreased.

D) did not change, and there was an upward movement along the supply of loanable funds

curve.

E) did not change, and there was a downward movement along the supply of loanable funds

curve.

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

58) When ________ changes, the supply of loanable funds curve shifts.

A) the expected rate of proit

B) people’s expected future income

C) the price level

D) “animal spirits”

E) investment

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

59) Which of the following factors changes saving supply and hence shifts the supply of

loanable funds curve?

i. disposable income

ii. wealth

iii. expected proit

A) i only

B) ii only

C) iii only

D) i and ii

E) i, ii, and iii

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

60) Which of the following shifts the supply of loanable funds curve?

A) change in the real interest rate

B) change in investment demand

C) change in disposable income

D) change in expected proit

E) change in “animal spirits”

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

61) A fall in the real interest rate brings a

A) movement up along the supply of loanable funds curve.

B) rightward shift of the supply of loanable funds curve.

C) movement down along the supply of loanable funds curve.

D) leftward shift of the supply of loanable funds curve.

E) rightward shift of the demand for loanable funds curve.

Skill: Level 1: Deinition

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

62) If the real interest rate rises, then the

A) supply of saving increases and the supply of loanable funds curve shifts rightward.

B) supply of saving decreases and the supply of loanable funds curve shifts leftward.

C) quantity of saving increases and there is a movement up along the supply of loanable

funds curve.

D) quantity of saving decreases and there is a movement down along the supply of loanable

funds curve.

E) demand for investment decreases and the demand for loanable funds curve shifts

leftward.

Skill: Level 1: Deinition

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

63) If the real interest rate

A) rises, the supply of loanable funds curve shifts rightward.

B) rises, the supply of loanable funds curve shifts leftward.

C) falls, there is a movement along the supply of loanable funds curve to a higher quantity

of saving.

D) falls, there is a movement along the supply curve of loanable funds to a lower quantity of

loanable funds .

E) falls, the supply of loanable funds curve shifts leftward.

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

64) The supply of loanable funds curve has a positive slope because the

A) higher the real interest rate, the lower the return to saving.

B) average return in the stock market is directly related to the real interest rate.

C) lower the real interest rate, the higher the return to saving.

D) lower the real interest rate, the lower the return to saving.

E) quantity of investment increases when the real interest rate increases.

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

65) If wealth ________, then saving increases, which is shown by a ________.

A) increases; movement upward along the supply of loanable funds curve

B) decreases; movement downward along the supply of loanable funds curve

C) increases; rightward shift of the supply of loanable funds curve

D) decreases; rightward shift of the supply of loanable funds curve

E) increases; leftward shift of the supply of loanable funds curve

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

66) Which of the following factors does NOT shift the supply of loanable funds curve?

i. change in disposable income

ii. change in wealth

iii. change in expected proit

A) i only

B) ii only

C) iii only

D) i and ii

E) ii and iii

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

67) The supply of loanable funds curve has a ________ slope and the demand for loanable

funds curve has a ________ slope.

A) positive; positive

B) positive; negative

C) negative; positive

D) negative; negative

E) vertical; horizontal

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

68) In which of the following cases would the supply of loanable funds curve shift

rightward?

A) Joe is worried about cutbacks at his irm, so his expected future income falls.

B) In June, Sally learns that at year’s end she will receive a bonus that will double her

current salary.

C) The stock market booms, so people’s wealth increases.

D) The economy moves into a recession.

E) Investment demand increases.

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

69) A decrease in households’ disposable income ________ saving supply, and the supply of

loanable funds curve ________.

A) decreases; shifts rightward

B) decreases; shifts leftward

C) increases; shifts rightward

D) increases; shifts leftward

E) does not change; does not shift

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

70) An increase in disposable income leads to a

A) leftward shift of the demand for loanable funds curve.

B) downward movement along the supply of loanable funds curve.

C) rightward shift of the supply of loanable funds curve.

D) leftward shift of the supply of loanable funds curve.

E) rightward shift of the demand for loanable funds curve.

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

71) A decrease in wealth leads to a

A) leftward shift of the demand for loanable funds curve.

B) downward movement along the supply of loanable funds curve.

C) rightward shift of the supply of loanable funds curve.

D) leftward shift of the supply of loanable funds curve.

E) rightward shift of the demand for loanable funds curve.

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

72) An increase in wealth ________ saving supply, and the supply of loanable funds curve

________.

A) decreases; shifts rightward

B) decreases; shifts leftward

C) increases; shifts rightward

D) increases; shifts leftward

E) does not change; does not shift

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

73) When wealth ________, saving supply ________, and the supply of loanable funds curve

shifts ________.

A) decreases; decreases; leftward

B) increases; increases; leftward

C) decreases; decreases; rightward

D) increases; decreases; leftward

E) increases; increases; rightward

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

74) An increase in people’s expected future disposable income ________ saving supply, and

the supply of loanable funds curve ________.

A) decreases; shifts rightward

B) decreases; shifts leftward

C) increases; shifts rightward

D) increases; shifts leftward

E) does not change; does not shift

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

75) A decrease in expected future income leads to a

A) rightward shift of the demand for loanable funds curve.

B) downward movement along the supply of loanable funds curve.

C) rightward shift of the supply of loanable funds curve.

D) leftward shift of the supply of loanable funds curve.

E) leftward shift of the demand for loanable funds curve.

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

76) Suppose that the initial supply of loanable funds curve is SLF1. In the igure above, an

increase in the real interest rate leads to

i. a shift in the supply of loanable funds curve from SLF1 to SLF2.

ii. a shift in the supply of loanable funds curve from SLF1 to SLF3.

iii. a movement along the supply of loanable funds curve SLF1.

iv. no change whatever.

A) i only

B) ii only

C) iii only

D) i and iii

E) iv only

Skill: Level 3: Using models

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

77) In the igure above, the shift in the supply of loanable funds curve from SLF1 to SLF2

could be the result of

A) an increase in the real interest rate.

B) a decrease in disposable income.

C) an increase in expected rate of proit.

D) a decrease in wealth

E) an increase in expected future disposable income.

Skill: Level 3: Using models

Section: Checkpoint 10.2

Status: Old

AACSB: Analytical thinking

78) In the loanable funds market, a shortage of loanable funds occurs when the

A) demand for loanable funds exceeds supply of loanable funds.

B) supply of loanable funds exceeds demand for loanable funds.

C) quantity of loanable funds supplied exceeds the quantity of loanable funds demanded.

D) quantity of loanable funds demanded exceeds the quantity of loanable funds supplied.

E) supply of loanable funds curve shifts rightward.

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

79) If the real interest rate is less than the equilibrium real interest rate, there is a ________

of loanable funds, and ________.

A) surplus; some borrowers cannot ind the funds they want

B) shortage; some borrowers cannot ind the funds they want

C) surplus; borrowers have an easy time inding the funds they want

D) shortage; borrowers have an easy time inding the funds they want

E) shortage; savers increase their saving supply to restore the equilibrium

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

80) When the real interest rate ________ the equilibrium real interest rate, there is a

________ of loanable funds and the real interest rate ________.

A) exceeds; surplus; rises

B) is less than; surplus; rises

C) exceeds; shortage; rises

D) is less than; shortage; rises

E) is less than; shortage; falls

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

81) If a surplus of loanable funds exists in the loanable funds market, the real interest rate

________ and the quantity of saving ________.

A) rises; increases

B) rises; decreases

C) falls; increases

D) falls; decreases

E) falls; does not change

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking

82) The equilibrium real interest rate is 5 percent. If the real interest rate is

A) 3 percent, then the supply of loanable funds curve will shift leftward as new savers enter

the market.

B) 6 percent, the demand for loanable funds curve will shift rightward as irms enter the

market to borrow at the lower rate.

C) 8 percent, there is a surplus of loanable funds.

D) 2 percent, there is a shortage of loanable funds.

E) anything other than 5 percent, the supply of loanable funds curve and/or the demand for

loanable funds curve will shift to move the real interest rate to 5 percent.

Skill: Level 2: Using deinitions

Section: Checkpoint 10.2

Status: Old

AACSB: Relective thinking