TOPIC #$1$: Loanable Funds Model

Q#$1$: TRUE FALSE The demand curve in the loanable funds model slopes downward and represents private firms$($and government$)$ demand for funds to borrow. Q#$2$: TRUE FALSE The supply curve is upward sloping and represents banks supplying loanable funds. Q#$3$: TRUE FALSE If the interest rate is lower than the equilibrium interest rate in the market for loanable funds, then Qs $>$ Qd for loanable funds, i$.$e$.$ there is an excess supply of loanable funds. Q#$4$: TRUE FALSE Equilibrium in the loanable funds model is defined by the Real interest rate at which Qs $=$ Qd for loanable funds. Q#$5$: TRUE FALSE A firm will borrow from the loanable funds market to fund a specific project if the expected rate of return for the project is greater than $($or equal to$)$ the real interest rate. Q#$6$: TRUE FALSE If the supply of loanable funds increases, i$.$e$.$ supply curve shifts out, the equilibrium real interest rate should decrease. Q#$7$: TRUE FALSE Government borrowing impacts the supply curve for loanable funds. TOPIC #$2$: mpc and the Multipliers Q#$8$: TRUE FALSE If someone$$s mpc $=0\mathrm{.}75,$ that means if you give that person an additional $$1,$ they would like to spend $$0\mathrm{.}75$ and save $$0\mathrm{.}25.$ Q#$9$: TRUE FALSE In general we know that the US has a very low mpc compared to other developed countries such as Germany, Japan, etc. Q#$10$: TRUE FALSE It is always true that a country$$s mpc $+$ mps $=0.$ For questions #$11-$ #$14$ assume that France has an mpc $=0\mathrm{.}65.$ Q#$11$: TRUE FALSE France$$s multiplier for spending on transfer payments will be greater than its multiplier for spending on government consumption. Q#$12$: TRUE FALSE The multiplier for taxes in France will be $1\mathrm{.}86($with rounding$).$ Q#$13$: TRUE FALSE France$$s mps is less than $0\mathrm{.}50.$ Q#$14$: TRUE FALSE If a wealthy French woman spends $100($million$)$ on a new house in France, that will increase France$$s RGDP by more than $100($million$).$ TOPIC #$3$: Introduction to AD$/$AS Q#$15$: TRUE FALSE The AD$/$AS graphs has RGDP on the x$-$axis and inflation $($or prices$)$ on the y$-$axis. Q#$16$: TRUE FALSE AD is upward sloping. Q#$17$: TRUE FALSE If AS increases, equilibrium inflation should also increase. Q#$18$: TRUE FALSE We can use the Keynesian equation to help understand shifts in AD$.$ Q#$19$: TRUE FALSE If AD and AS both increase, we can be sure that RGDP$*$ will increase. Q#$20$: TRUE FALSE Oil prices $($and input prices in general$)$ are an important shifter for AD$.$ TOPIC #$4$: Please read House Speaker Pelosi$$s statement on small business. These questions are based on using our course material to understand and interpret this article. Q#$21$: TRUE FALSE According to Speaker Pelosi, small businesses are important to the US economy. Q#$22$: TRUE FALSE According to Speaker Pelosi, the "loanable funds market" has been working well for small businesses. Q#$23$: TRUE FALSE The bills that Speaker Pelosi discusses seem intended to increase the supply of loanable funds to small business $($i$.$e$.$ increase the ability for small business to borrow money.$)$ Q#$24$: TRUE FALSE According to Speaker Pelosi, helping small businesses should increase the demand for workers. Q#$25$: TRUE FALSE According to this press release, small businesses are an important engine for capital creation in the US economy.