Question

1. The Market for Loanable Funds:

A claim to partial ownership in a firm

A certificate of indebtedness

The market in which those who want to save supply funds and those who want to borrow to invest demand funds

Financial institutions through which savers can directly provide funds to borrowers

Question 2 Financial Markets:

The market in which those who want to save supply funds and those who want to borrow to invest demand funds

A certificate of indebtedness

Financial institutions through which savers can directly provide funds to borrowers

A claim to partial ownership in a firm

Question 3 Which of the following would not increase savings in the economy:

high real interest rate

consumers become more patient

household income rises temporarily

consumers become more confident

government reduces its budget deficit

Question 4 Which of the following would make real interest rates fall?

New technology is developed

Tax incentives for business investment

Tax increases for the interest on savings

The government increases it budget deficit

Consumers become more patient

Question 5 Which of the following would increase the quantity of investment?

Elimination of all investment tax credits

New technology

Investor pessimism

Higher real interest rates

All of these

Question 6 What would increase the amount of savings?

higher inflation

lower inflation

lower consumer confidence

lower real interest rate

less consumer patience

Question 71

Savings is determined by the real interest rate, not the nominal rate, because

a.The real interest rate is the rate that banks quote to their customers

b. Nominal interest rate is too theoretical, while the real interest rate is more realistic

c. People really care about how much goods their savings will buy in the future

d. All of these

e. The real rate is determined by the market while the nominal rate is determined by the Fed.

Answer 1

Q.1]The Market for Loanable Funds:

Ans: The market in which those who want to save supply funds and those who want to borrow to invest demand funds

Question 2 Financial Markets:

Ans : Financial institutions through which savers can directly provide funds to borrowers

Q . 3   Which of the following would not increase savings in the economy:

Ans :    Consumers become more confident. Consumers normally prefer to save to protect them from future uncertainity . If they will become confident may be because of political stability or due to any other reason , they will prefer to spend more rather than save for future.

Question 4 Which of the following would make real interest rates fall?

Ans : Consumers become more patient. Due to this consumers will prefer to save than spend which will increase supply of funds in the market.

Question 5 Which of the following would increase the quantity of investment?

Ans : New technology will increase the quantity of investment as it will be more efficient. Other options will reduced the investment.

Question 6 What would increase the amount of savings?

Ans : Lower consumer confidence will tempt consumers to save more for future uncertinities .

Q. 71 Savings is determined by the real interest rate, not the nominal rate, because

Ans. People really care about how much goods their savings will buy in the future