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Question;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 +?

 

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