is theand bonds h2 Shay n Multiple Choice Quiz 1. Financial capital is the A mon
ID: 1203319 • Letter: I
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is theand bonds h2 Shay n Multiple Choice Quiz 1. Financial capital is the A money used to buy stocks and bonds l capital borrow B. ey used to buy physical capital C funds that savers supply and buyers of tnupply and buyers of physical capital bor D. money in the bank ment bond is $50 and the owner of the 2. If the price of a U.S government 2.50 income each year, then the interest rate on the onitited to 52.50 incomne each year then the interest rate on the bende bond A. 0.2 percent B. 5percent C 10 percent D20 percent 3. In the lainable funds market, an increase in A. the real interest rate increases the demand for loanable fund B. expected profit increases the demand for loanable funds t the the demand for loanable funds, but expected profit doesn 't change the demand for loanable funds C ntity of loanable funds demanded increases D. the real interest rate doesn't change the quantity of loanable funds demanded increases 4. The supply of loanable funds increases A. when the demand for loanable funds increases B. when people increase saving as the real interest rate rises C. when disposable income increases or wealth decreases D. if net taxes decrease or expected future income increases 5. An increase in expected profit How do the real interest rate and the real the quantity of loanable funds. funds. A. decreases; decreases B increases; decreases C. decreases; increases D. increases; increases 6. A government budget surplus The A. increases the supply of loanable funds B. raises the real interest rate C. decreases the demand for loanable funds and lowers the real interest rate D. decreases net taxes, increases disposable income, and increases saving 7. Crowding out occurs when When you h A. households' budgets are in deficit and saving decreases B. the government budget is in surplus, so people have paid too much tax C. the government budget is in deficit and the real interest rate rises D, the government budget is in deficit but taxpayers are rational and the you will be a 1 Define rn 2 Describe 3 Describ Explain Ricardo-Barro effect operates 8. An increase in the government budget deficit- A. increases private saving and investment B. increases private saving and decreases investment C. increases the supply of private saving and decreases investment D. decreases private saving and investment control decreas investmentExplanation / Answer
1. The correct answer is option c: Funds that savers supply and buyers of physical capital borrow.
In other words, Finance is the lending and borrowing that moves funds from savers to spenders.
2. The correct answer is option b = 5%
50*interest rate = 2.50
Interest rate = 2.50/50 = 0.05 = 5%
3. The correct answer is option b: Expected profits increases the demand for loanable funds.
Since, the lower the real interest rate, the more projects that are profitable, so the larger is the quantity of loanable funds demanded.
4. The correct answer is option B: When people increase saving as the real interest rate rises.
Since the higher the real interest rate, the greater is the quantity of saving and the greater is the quantity of loanable funds supplied
5. The correct answer is option A: Increases the supply of loanable funds.
The supply of loanable funds get increased when there is Government Budget surplus.
6. The correct answer is option D: Increases, Increases
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