Question 1

If there is an increase in the expected inflation rate,then,

Accepted Answer

A)   the supply and demand for loanable funds will decrease.
B)   the supply and demand for loanable funds will increase.
C)   the supply of loanable funds will decrease, and the demand for loanable funds will increase.
D)   the supply of loanable funds will increase, and the demand for loanable funds will decrease.

Question 2

The supply curve for land is __________ when the total supply is in question and __________ when subparcels are in question.

Accepted Answer

A)   upward sloping; vertical
B)   upward sloping; upward sloping
C)   vertical; vertical
D)   vertical; upward sloping

Question 3

The longer the term of a loan,the __________ the interest rate charged for the loan; the more risk associated with a loan (from the lender's point of view) ,the __________ the interest rate charged for the loan.

Accepted Answer

A)   higher; lower
B)   lower; higher
C)   higher; higher
D)   lower; lower

Question 4

The quantity demanded of loanable funds is inversely related to the rate of interest.

Accepted Answer

A) True 
 B)False

Question 5

The demand for loanable funds curve is

Accepted Answer

A)   upward sloping.
B)   downward sloping.
C)   perfectly elastic.
D)   perfectly inelastic.

Question 6

Pure economic rent is

Accepted Answer

A)   the payment to factors owned by entrepreneurs.
B)   economic profits.
C)   the payment to factors whose supply is perfectly elastic.
D)   a payment made to land.
E)   the payment to factors whose supply is perfectly inelastic.

Question 7

There are two societies,A and B,that are alike in every way but one.In society A,people have a high rate of time preference,and in society B,people have a low rate of time preference.It follows that

Accepted Answer

A)   the demand for consumption loans will probably be lower in A than B.
B)   interest rates will be lower in B than A.
C)   there will be more saving in A than B.
D)   b and c
E)   none of the above

Question 8

Exhibit 30-4
 1 to R1 + T. B)  fall from R1 to R1 - T. C)  remain unchanged at R1. D)  fall to 0." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 30-4.Assume a per acre tax,T,is imposed on land use.The rent (per acre) of land services will

Accepted Answer

A)   rise from R1 to R1 + T.
B)   fall from R1 to R1 - T.
C)   remain unchanged at R1.
D)   fall to 0.

Question 9

Which of the following statements is false?

Accepted Answer

A)   Interest would not exist in a barter (moneyless)  economy because there is no money in a barter economy.
B)   The real interest rate is equal to the nominal interest rate minus the expected inflation rate.
C)   The source of monopoly profits is often high barriers to entry.
D)   The nominal interest rate will equal the real interest rate only when the expected inflation rate is zero.

Question 10

The higher the cost of processing a loan,the __________ the interest rate charged for the loan; the lower the expected inflation rate,the __________ the nominal interest rate.

Accepted Answer

A)   higher; lower
B)   lower; higher
C)   higher; higher
D)   lower; lower

Question 11

Exhibit 30-3
 
-Refer to Exhibit 30-3.The real interest rate in year 2 is

Accepted Answer

A)   25 percent.
B)   5 percent.
C)   15 percent.
D)   -25 percent.
E)   -15 percent.

Question 12

Which of the following statements is true?

Accepted Answer

A)   Nominal interest rate = real interest rate - expected inflation rate.
B)   Nominal interest rate = real interest rate + expected inflation rate.
C)   Real interest rate = nominal interest rate + expected inflation rate.
D)   Expected inflation rate = nominal interest rate + real interest rate.

Question 13

Pure economic rent can exist only when the factor under consideration

Accepted Answer

A)   is something other than land.
B)   has a supply curve that is perfectly elastic.
C)   has a demand curve that is perfectly elastic.
D)   has a supply curve that is perfectly inelastic.
E)   a and d

Question 14

Entrepreneurs

Accepted Answer

A)   operate within markets.
B)   increase trade by satisfying an unmet demand for a good or service.
C)   increase trade by increasing the transaction costs of making trades.
D)   a and b
E)   a, b and c

Question 15

Which of the following statements is false?

Accepted Answer

A)   Competing for artificial rents is socially unproductive; competing for real rents is not.
B)   If the production of good X generates real rents, then in the process of competing for these real rents, it would not be unusual for the supply of good X to rise.
C)   Individuals and firms will compete for real rents, but not for artificial rents.
D)   An artificial rent is an economic rent that would not exist without government.

Question 16

The supply of loanable funds depends most directly on

Accepted Answer

A)   investment expenditures.
B)   people's saving and newly created money.
C)   bond and stock activity.
D)   the profits of firms.

Question 17

A person says,"Prices (for meals at restaurants,clothes,taxis,etc.) are high in Paris,France because land rents are so high in Paris." This person

Accepted Answer

A)   confuses economic rent and pure economic rent.
B)   confuses cause and effect.
C)   believes that land rents are price determining, when in fact land rents are price determined.
D)   b and c
E)   a and c

Question 18

As interest rates decrease,present values __________,and firms will buy __________ capital goods.

Accepted Answer

A)   increase; fewer
B)   decrease; fewer
C)   increase; more
D)   decrease; more

Question 19

Describe how nineteenth-century economist David Ricardo viewed the relationship between rents and grain prices in England.How did his perspective differ from that of the prevailing view on this situation?

Accepted Answer

Ricardo contended that land rents were h...

Question 20

The terms interest and interest rate are synonyms.

Accepted Answer

A) True 
 B)False

Exam 30: Interest, Rent, and Profit

The supply of loanable funds depends most directly on

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Which of the following statements is false?

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Entrepreneurs

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Which of the following statements is false?

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Pure economic rent can exist only when the factor under consideration

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A person says,"Prices (for meals at restaurants,clothes,taxis,etc.) are high in Paris,France because land rents are so high in Paris." This person

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The supply curve for land is __________ when the total supply is in question and __________ when subparcels are in question.

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The longer the term of a loan,the __________ the interest rate charged for the loan; the more risk associated with a loan (from the lender's point of view) ,the __________ the interest rate charged for the loan.

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Which of the following statements is true?

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Exhibit 30-3 -Refer to Exhibit 30-3.The real interest rate in year 2 is

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As interest rates decrease,present values __________,and firms will buy __________ capital goods.

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The higher the cost of processing a loan,the __________ the interest rate charged for the loan; the lower the expected inflation rate,the __________ the nominal interest rate.

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If there is an increase in the expected inflation rate,then,

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Pure economic rent is

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The terms interest and interest rate are synonyms.

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The demand for loanable funds curve is

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The quantity demanded of loanable funds is inversely related to the rate of interest.

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Describe how nineteenth-century economist David Ricardo viewed the relationship between rents and grain prices in England.How did his perspective differ from that of the prevailing view on this situation?

Correct AnswerverifiedRicardo contended that land rents were h...View AnswerShow Answer

Exhibit 30-4 -Refer to Exhibit 30-4.Assume a per acre tax,T,is imposed on land use.The rent (per acre) of land services will

Correct AnswerverifiedShow Answer

There are two societies,A and B,that are alike in every way but one.In society A,people have a high rate of time preference,and in society B,people have a low rate of time preference.It follows that

Correct AnswerverifiedShow Answer

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The supply curve for land is when the total supply is in question and when subparcels are in question.

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The longer the term of a loan,the the interest rate charged for the loan; the more risk associated with a loan (from the lender's point of view) ,the the interest rate charged for the loan.

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As interest rates decrease,present values ,and firms will buy capital goods.

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The higher the cost of processing a loan,the the interest rate charged for the loan; the lower the expected inflation rate,the the nominal interest rate.

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Ricardo contended that land rents were h...
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