Question 1

Economists often speak as if there is a single interest rate when in fact there are many interest rates. What four factors explain the differences in these interest rates?

Accepted Answer

The four factors that explain difference...

Question 2

The real rate of interest is the interest rate

Accepted Answer

A)  charged on long-term government bonds.
B)  associated with a riskless loan.
C)  that large commercial banks charge their best customers.
D)  after adjustment has been made for inflation.E) A) and D)
F) A) and C)

Question 3

Why is money not an economic resource? If it is not productive, then why do businesses want to obtain or borrow it?

Accepted Answer

It is important to remember that money i...

Question 4

Landowners will not receive any rent so long as

Accepted Answer

A)  there is any tax on land.
B)  the supply and demand curves for land intersect.
C)  the supply curve of land is perfectly inelastic.
D)  the supply curve lies entirely to the right of the demand curve.E) B) and C)
F) None of the above

Question 5

The table shows the projected rate of return and number of investment projects that might be undertaken by a small firm. Each project requires an investment of $1,000. If the interest rate increases from 5 percent to 15 percent, the amount of loanable funds demanded by this firm

Accepted Answer

A)  increases by $1,000.
B)  increases by $3,000.
C)  decreases by $2,000.
D)  decreases by $3,000.E) B) and C)
F) A) and B)

Question 6

The equilibrium interest rate equates

Accepted Answer

A)  nominal and real interest rates.
B)  the quantities demanded and supplied of loanable funds.
C)  consumption and saving.
D)  taxes and government spending.E) A) and B)
F) A) and C)

Question 7

What is meant by the term compound interest?

Accepted Answer

Compound interest is the accumulation of...

Question 8

Refer to the table, in which the values for columns (2) through (5) are in acres. If the relevant columns are (1) , (2) , and (4) , land rent will be

Accepted Answer

A)  $200 per acre.
B)  $100 per acre.
C)  $300 per acre.
D)  $0 per acre.E) A) and C)
F) C) and D)

Question 9

Pure, or economic, profit is

Accepted Answer

A)  the amount by which accounting profits exceed normal profits.
B)  determined by subtracting explicit costs from total revenue.
C)  the return required to retain entrepreneurial talent in some particular line of production.
D)  the return to any resource the supply of which is perfectly inelastic.E) A) and B)
F) B) and D)

Question 10

If Congress were to pass a law exempting interest on saving from taxation, the

Accepted Answer

A)  supply of loanable funds would decrease and the equilibrium interest rate would rise.
B)  supply of loanable funds would increase and the equilibrium interest rate would fall.
C)  demand for loanable funds would increase and the equilibrium interest rate would rise.
D)  equilibrium interest rate would be unaffected.E) B) and C)
F) None of the above

Question 11

Which expression is used to calculate the future value of an amount of money?

Accepted Answer

A)  Present Value × (1 + interest rate) time
B)  Present Value / (1 + interest rate) time
C)  Present Value × (1 + time) interest rate
D)  (1 + interest rate) time / Present ValueE) B) and C)
F) A) and D)

Question 12

Since 1900, the relative share of "wages & salaries, plus proprietors' income" in the total income earned by Americans in a typical year has been about

Accepted Answer

A)  20 percent.
B)  50 percent.
C)  80 percent.
D)  95 percent.E) A) and B)
F) None of the above

Question 13

In the market for loanable funds,

Accepted Answer

A)  an increase in available bank lending will increase the interest rate.
B)  a decrease in saving will reduce the interest rate.
C)  an increase in borrowing for investment will increase the interest rate.
D)  a decrease in government borrowing will increase the interest rate.E) B) and D)
F) B) and C)

Question 14

Suppose you borrow $1,000 for a year and the lender discounts $100 of interest at the time the loan is made (giving the borrower only $900) . The interest rate on this loan is about

Accepted Answer

A)  10.0 percent.
B)  11.1 percent.
C)  9.0 percent.
D)  19.0 percent.E) All of the above
F) A) and D)

Question 15

Which of the following would cause an increase in interest rates in credit markets?

Accepted Answer

A)  a decrease in business demand for credit
B)  an increase in the supply of consumer saving
C)  an increase in the supply of business saving
D)  an increase in consumer demand for creditE) B) and D)
F) B) and C)

Question 16

Refer to the table representing Kara's bank account. If the $5,000 was deposited into her account at the beginning of year 1, the value for cell A is

Accepted Answer

A)  $4.
B)  $200.
C)  $20.
D)  $208.00.E) A) and D)
F) A) and C)

Question 17

The marginal revenue product (MRP) of land declines as more land is brought into use. As a result, the

Accepted Answer

A)  demand curve for land is downsloping.
B)  demand curve for land is upsloping.
C)  supply curve for land is downsloping.
D)  supply curve for land is upsloping.E) All of the above
F) None of the above

Question 18

Suppose that in some year nominal interest rates are less than the rate of inflation. This means that

Accepted Answer

A)  money demand exceeds money supply.
B)  real interest rates are negative.
C)  real interest rates are positive and unusually high.
D)  real interest rates exceed nominal interest rates.E) None of the above
F) B) and C)

Question 19

The price paid for the use of money is called

Accepted Answer

A)  commission.
B)  royalty.
C)  interest.
D)  rent.E) B) and C)
F) C) and D)

Question 20

The demand side, not supply, is the major factor determining how high land's rent will be.

Accepted Answer

A) True 
 B)False

Exam 18: Rent, Interest, and Profit

Which expression is used to calculate the future value of an amount of money?

Correct AnswerverifiedShow Answer

Since 1900, the relative share of "wages & salaries, plus proprietors' income" in the total income earned by Americans in a typical year has been about

Correct AnswerverifiedShow Answer

The price paid for the use of money is called

Correct AnswerverifiedShow Answer

Suppose that in some year nominal interest rates are less than the rate of inflation. This means that

Correct AnswerverifiedShow Answer

Landowners will not receive any rent so long as

Correct AnswerverifiedShow Answer

The table shows the projected rate of return and number of investment projects that might be undertaken by a small firm. Each project requires an investment of $1,000. If the interest rate increases from 5 percent to 15 percent, the amount of loanable funds demanded by this firm

Correct AnswerverifiedShow Answer

Suppose you borrow $1,000 for a year and the lender discounts $100 of interest at the time the loan is made (giving the borrower only $900) . The interest rate on this loan is about

Correct AnswerverifiedShow Answer

Economists often speak as if there is a single interest rate when in fact there are many interest rates. What four factors explain the differences in these interest rates?

Correct AnswerverifiedThe four factors that explain difference...View AnswerShow Answer

Why is money not an economic resource? If it is not productive, then why do businesses want to obtain or borrow it?

Correct AnswerverifiedIt is important to remember that money i...View AnswerShow Answer

The demand side, not supply, is the major factor determining how high land's rent will be.

Correct AnswerverifiedShow Answer

If Congress were to pass a law exempting interest on saving from taxation, the

Correct AnswerverifiedShow Answer

In the market for loanable funds,

Correct AnswerverifiedShow Answer

The real rate of interest is the interest rate

Correct AnswerverifiedShow Answer

The equilibrium interest rate equates

Correct AnswerverifiedShow Answer

Refer to the table, in which the values for columns (2) through (5) are in acres. If the relevant columns are (1) , (2) , and (4) , land rent will be

Correct AnswerverifiedShow Answer

The marginal revenue product (MRP) of land declines as more land is brought into use. As a result, the

Correct AnswerverifiedShow Answer

What is meant by the term compound interest?

Correct AnswerverifiedCompound interest is the accumulation of...View AnswerShow Answer

Refer to the table representing Kara's bank account. If the $5,000 was deposited into her account at the beginning of year 1, the value for cell A is

Correct AnswerverifiedShow Answer

Which of the following would cause an increase in interest rates in credit markets?

Correct AnswerverifiedShow Answer

Pure, or economic, profit is

Correct AnswerverifiedShow Answer

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The four factors that explain difference...
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It is important to remember that money i...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Compound interest is the accumulation of...
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Correct Answer
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Correct Answer
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Correct Answer
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