Chapter 14 – Rent, Interest, and Profit
54. A decrease in the supply of loanable funds and an increase in the demand for loanable
funds will:
55. There will be pressure on the interest rate for loanable funds to increase when:
56. An increase in the demand for loanable funds may be caused by a(n):
Chapter 14 – Rent, Interest, and Profit
57. If an economic expansion in the economy caused an increase in the demand for loanable
funds, what would be the effect on the interest rate and the quantity of funds loaned in the
credit market?
58. Which would cause an increase in interest rates in credit markets?
59. Suppose many businesses want to increase their stock of capital goods and decide to
borrow funds to do it. Which would be the likely result of this event?
Chapter 14 – Rent, Interest, and Profit
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60. If a firm buys a new computer system that costs $12,000 a year it can reduce the firm’s
cost by $900 a year. The firm should borrow funds and purchase this machine if it can
negotiate an annual interest rate on the loan between:
61. A firm wants to borrow funds to purchase a new piece of equipment that costs $20,000
and has a useful life of one year. The investment is expected to produce an additional $1,500
in total revenue. The firm will most likely make the investment if the interest rate is:
It shows the projected rate of return and number of investment projects which might be
undertaken by a small firm. Each project requires an investment of $1,000.
Chapter 14 – Rent, Interest, and Profit
62. Refer to the above table and information. If the interest rate increases from 5 percent to 15
percent, the quantity demanded of loanable funds for this firm:
63. Refer to the above table and information. If the interest rate increases from 10 percent to
25 percent, the quantity demanded of loanable funds for this firm:
64. Refer to the above table and information. If the interest rate decreases from 25 percent to
20 percent, the quantity demanded of loanable funds for this firm:
Chapter 14 – Rent, Interest, and Profit
65. Profit-maximizing businesses will buy more new machinery only if:
66. Which statement about interest rates is false?
67. Which factor will decrease the demand for loanable funds?
Chapter 14 – Rent, Interest, and Profit
68. A decrease in saving that leads to an increase in the interest rate will:
69. As interest rates decrease, the:
70. A firm considering whether to borrow money to purchase a capital good will compare the
rate of interest for the loan with the:
Chapter 14 – Rent, Interest, and Profit
71. Which expression is used to calculate the future value of an amount of money?
72. Which expression is used to calculate the present value of an amount of money?
73. If the interest rate is 15%, what is the future of value of $10,000 two years from now?
Chapter 14 – Rent, Interest, and Profit
74. If the interest rate is 5%, what is the future value of $5,000 three years from now?
75. If the interest rate is 10%, what is the present value of $25,000 received two years from
now?
76. If the interest rate is 5%, what is the present value of $10,000 received three years from
now?
Chapter 14 – Rent, Interest, and Profit
The following table applies to a loan with interest rate of 5% per period:
77. Refer to the table. What value goes on the cell labeled W?
78. Refer to the table. What value goes on the cell labeled X?
Chapter 14 – Rent, Interest, and Profit
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79. Refer to the table. What value goes on the cell labeled Z?
80. Government monetary authorities manipulate the supply of money in the economy
primarily to:
With investment-demand in an economy.
Chapter 14 – Rent, Interest, and Profit
81. Refer to the above table. If the interest rate is 15 percent:
82. Refer to the above table. An increase in the interest rate from 15% to 19% percent would:
83. Refer to the above table. Assume that investment demand decreased by $100 billion in the
investment-demand schedule. What expected rate of return and interest rate would create
$430 billion of investment?
Chapter 14 – Rent, Interest, and Profit
84. It will be most likely that an industry would borrow funds to expand capital facilities
when the:
85. If the desired real rate of interest is 5 percent and the expected rate of inflation is 15
percent, what is the nominal rate of interest?
86. If the inflation rate is 10 percent, what is a bank’s real rate of return on a loan of $100 at
10 percent interest?
Chapter 14 – Rent, Interest, and Profit
87. If you pay $1,980 annually on an $18,000 loan and the rate of inflation is 3 percent, then
the:
88. If you pay $10,625 annually on a $125,000 loan and the rate of inflation is 3 percent, then
the:
89. A usury law is a law that sets the:
Chapter 14 – Rent, Interest, and Profit
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90. For a usury law to be effective, the interest rate must be:
91. One effect of a usury law is that it will:
Figures are in billions of dollars.