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Chapter 30—Interest.doc

Chapter 30—Interest.doc - Chapter 30Interest Rent and...

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Chapter 30—Interest, Rent, and Profit MULTIPLE CHOICE 1. The two ways in which the word "interest" is used in economics are as the price for 2. Interest can be regarded as the 3. Is there a difference between the terms interest and interest rate ? 4. Suppose you borrow $1,000 today with the promise to pay back $1,060 one year from today. Then the interest rate is __________, and the interest is __________. 5. The nominal interest rate is determined 6. The demand for loanable funds comes from 7. As the interest rate falls, 8. The demand curve for loanable funds is 9. Loanable funds are 10. The supply of loanable funds depends most directly on 11. Which of the following statements is false ? 12. If the interest rate increases, then 13. The supply curve of loanable funds is ____________________ sloping, which implies that as the interest rate ___________________, the ____________________ loanable funds will increase. 14. The term "positive rate of time preference" suggests that
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15. If consumers prefer earlier availability of goods to later availability, they are said to have a _______________ rate of time preference. 16. A person who greatly prefers present to future consumption has a(n) ________________ rate of time preference. 17. If you have a high rate of time preference, then you are 18. The people most likely to save are those with a 19. If you have a low rate of time preference, then you 20. Abigail has a high rate of time preference while Cynthia has a low rate of time preference. If the interest rate payable on savings accounts increases from 5 percent to 7 percent, then 21. Which of the following statements is true? 22. The term "roundabout methods of production" refers to 23. Roundabout methods of production are said to be productive. What does this mean? 24. As the interest rate (price for loanable funds) decreases, businesses will 25. If the price for loanable funds is less than the return on capital, then firms will 26. If the return on capital is 12 percent and the price for loanable funds is 9 percent, then 27. If the return on capital is 12 percent and the price for loanable funds is 14 percent, then
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28. Jimmy borrowed $20,000 to add a room to his house. He financed the loan over 3 years at 8 percent a year. He expects a 3 percent inflation rate each year for the next 3 years. It follows that he expects to pay an annual real interest rate of 29. Which of the following is true? 30. If the price for loanable funds is greater than the return on capital, then firms will 31. Which of the following is true? 32. Ceteris paribus , the more risk associated with a loan, 33. Which of the following statements is true? 34. Which of the following statements is true? 35. Which of the following statements is true? 36. If suddenly a 4 percent inflation rate (instead of a zero percent inflation rate) is expected by both suppliers and demanders in the loanable funds market, then 37. If 1 percent inflation rather than zero percent inflation is expected by both the suppliers and demanders of loanable funds, then the nominal interest rate will 38. If the nominal interest rate is 9 percent and expected inflation rate is 5 percent, the real interest rate equals 39. If the nominal interest rate is 4 percent and expected inflation rate is 5 percent, the real interest rate
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40.
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