Multiple Choice Questions:
1. At a higher than equilibrium real interest rate, the quantity of loanable funds supplied would be ________ than the quantity of loanable funds demanded—there would be a _________ of loanable funds at this real interest rate?
a. Greater; shortage
b. Greater; surplus
c. Less than; shortage
d. Less than; surplus
2. A budget deficit?
a. Adds to national savings.
b. Lowers the interest rate.
c. Increases private investment.
d. Does none of the above, other things equal.
3. An increase in the real interest rate?
a. Shifts the supply of loanable funds curve to the right.
b. Shifts the supply of loanable funds curve to the left.
c. Shifts the loanable funds demand curve to the right.
d. Shifts the loanable funds demand curve to the left.
e. Does none of the above.
4. An increase in expectations about the profitability of investment will tend to?
a. Increase both the interest rate and the level of investment.
b. Decrease both the interest rate and the level of investment.
c. Increase the interest rate and decrease the level of investment.
d. Decrease the interest rate and increase the level of investment.
5. Suppose investors become pessimistic about the economy, lowering their expected returns on investment projects. The results would include?
a. A leftward shift in the supply of loanable funds.
b. A rightward shift in demand for loanable funds.
c. A smaller quantity of funds changing hands in the loanable funds market.
d. The interest rate falling.
e. Both c and d.
6. If the equilibrium interest rate increases and quantity of funds traded in the loanable fund market decreases, it could have been caused by?
a. Investors becoming more optimistic about profit prospects.
b. Investors becoming more pessimistic about profit prospects.
c. Households deciding to save less.
d. Households deciding to save more.
7. Which of the following was not a factor in the financial crisis of 2008?
a. Poorly informed borrowers.
b. Credit rating agencies.
c. Fraud.
d. Misguided government policies.
e. All of the above were factors in the financial crisis of 2008.