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11.If current market rates on Treasury bonds are 6 percent and the real growth of the economy has and will be expected to grow at 3 percent. According to the Fisher effect, what is the expected rate of inflation?

a.  3%

b.  9%

c.  higher than 6%

d.  close to zero

12.The demand for loanable funds may shift upward (increase) from

a.a decline in the supply of loanable funds.

b.a decline in business prospects.

c.an improvement in technology.

d.an expectation of an upcoming recession.

13.Interest rates will decline when the demand for loanable funds

a.shifts to the left.

b.shifts to the right.

c.anticipates reduced growth in the economy.

d."a" and "c" above.

14.All but one of the following affects the supply of loanable funds?

a.the level of income

b.the investment opportunities in the economy.

c.the savings rate

d.Federal Reserve monetary policy actions.

15.An increase in the rate of expected inflation will

a.shift the demand for loanable funds to the left (down).

b.shift the supply of loanable funds to the left (down).

c.shift demand and supply for loanable funds to the right (up) decreasing interest rates.

d.shifts demand and supply for loanable funds to the right (up) increasing interest rates.

16.Deficit spending units (DSU) are represented in loanable funds theory as

a.suppliers of loanable funds.

b.demanders of financial claims.

c.demanders of loanable funds.

d.DSUs are not represented in the loanable funds theory of interest rate determination.

17.An economic recession would be represented in loanable funds theory as

a.a shift in the demand for loanable funds to the right associated with reduced business investment demand and a decline in interest rates.

b.a shift in the demand for loanable funds to the left as real investment weakens, a shift to the right of the supply of loanable funds as the Fed expands the money supply, and a decrease in interest rates.

c.a movement along the demand for loanable funds as interest rates decline.

d.an increase in the supply of loanable funds as the level of savings increases accompanied with an increase in the demand for loanable funds as housing investment is increased, and a decrease in interest rates.

18.Increased government budget deficits

a.shifts the demand for loanable funds to the left, reducing interest rates.

b.shifts the supply of loanable funds to the right, reducing interest rates.

c.shifts the demand for loanable funs to the right, increasing interest rates.

d.shifts the supply of loanable funds to the left, reducing interest rates.

19.The realized rate of return may be negative if

a.investors' expected rate of inflation (Pe) was less than actual inflation (Pa).

b.investors' expected rate of inflation (Pe) was greater than actual inflation (Pa).

c.investors over-anticipated the level of inflation.

d.investors expected more inflation than was realized.

20.An increase (shift to right) in the supply of loanable funds (SL) may be related to all but one of the following:

a.an increase in the money supply.

b.an increase in household thriftiness.

c.an increase in household income.

d.an increase in personal income taxes.

 

 

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