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- 1. Multiple Choice
An increase in government spending only leads to an increase in the Demand for Loanable Funds whenthe spending is on infrastructure.the spending is on education.the spending is deficit spending.the spending leads to a surplus. - 2. Multiple ChoiceThe shift in the graph could be caused bygovernment deficit spending.the crowding out effect.an increase in wealth.an increase in personal savings.
- 3. Multiple ChoiceThe shift in the graph could be caused byan increase in consumer wealth.expectations of a recession.a government surplus.the balanced budget multiplier.
- 4. Multiple ChoiceThe shift in the graph could be caused bya government budget deficit.a government budget surplus.an increase in consumer wealth.a new technological innovation.
- 5. Multiple ChoiceThe shift in the graph could be caused bythe economy contracting.a decline in population.a new technology revolutionizes business.the government eliminates default risk.
- 6. Multiple ChoiceThe shift in the graph could be caused bythe crowding out effect.new technology.the government guarantees home loans.the market is expected to boom.
- 7. Multiple ChoiceThe shift in the graph could be caused byan increase in consumer wealth.an increase in deficit spending.the Fed buys securities.the population grows.
- 8. Multiple ChoiceThe shift in the graph could be caused byincreasing the discount rate.decreasing taxes.decreasing the Federal Funds rate.lowering the reserve requirement.
- 9. Multiple ChoiceIf investors expect the economy is headed for expansion the ______ of loanable funds will _______.demand; decreasedemand; increasesupply; decreasesupply; increase
- 10. Multiple ChoiceWhen entities like Fannie Mae and Freddie Mac guarantee a loan they are eliminating _____ for investors.default riskirrational exuberancewealth effecttechnological change
- 11. Multiple ChoiceIf the stock market sees increases in all sectors the _____ of loanable funds will _____ because of the _____ effect.supply: decrease; population growthdemand; fall; crowding outsupply; decrease; wealthdemand; decrease; default risk
- 12. Multiple ChoiceThe crowding out effect can only occur if thegovernment deficit spends.government runs a surplus.personal savings rate increases.economy begins to boom.
- 13. Multiple ChoiceThe crowding out effect manifests itself in the GDP formula by causingan increase in G and a decrease in Xn.a decrease in G and an increase in C.an increase in I and a decrease in G.an increase in G but a decrease in I.
- 14. Multiple ChoiceIrrational exuberance about the future of the economy would lead toan increase in DLFa decrease in DLFan increase in SLFa decrease in SLF
- 15. Multiple ChoiceA major technological break through would lead toan increase in DLFa decrease in DLFan increase in SLFa decrease in SLF
- 16. Multiple ChoiceA recession would lead toan increase in DLFa decrease in DLFan increase in SLFa decrease in SLF
- 17. Multiple ChoiceAn increase in disposable income would lead toan increase in the DLFa decrease in the DLFan increase in the SLFa decrease in the SLF
- 18. Multiple ChoiceIf a large segment of the population expects their income to fall in the futurean increase in DLFa decrease in DLFan increase in SLFa decrease in SLF
- 19. Multiple ChoiceIf the Fed raises the reserve requirement we can expectan increase in DLFa decrease in DLFan increase in SLFa decrease in SLF
- 20. Multiple ChoiceThe selling of securities will lead toan increase in DLFa decrease in DLFan increase in SLFa decrease in SLF
- 21. Multiple ChoiceWhat is measured on the Y axis of the Loanable funds market?real interest ratenominal interest nominal interest ratequantity of loanable fundsquantity of money
- 22. Multiple ChoiceAssume that businesses feel pessimistic about the future and therefore do not want to buy as much real capital (machines to help production) as before. To buy machines, businesses borrow money from banks. Because they don't want the machines, they do not want to borrow as much money as before. How would this affect the loanable funds market?demand for loanable funds increasesdemand for loanable funds decreasesthere is no change to demand for loanable funds
- 23. Multiple ChoiceAssume households increase their savings (and always assume households put most of their savings in banks). As a result, banks within the country's banking system have more funds from which they can make loans. Thus, how would this increase in household savings affect the loanable funds market?supply of loanable funds increasessupply of loanable funds decreasessupply of loanable funds does not change
- 24. Multiple Choice_____________ occurs when a government deficit drives up the interest rate and leads to reduced investment spending.Crowding OutRate of ReturnLoanable Funds MarketFisher Effect
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