Question : 10.2   The Loanable Funds Market 1) One type of demander in : 1240434

10.2   The Loanable Funds Market

1) One type of demander in the loanable funds market

A) wants funds to purchase financial capital.

B) wants funds to purchase physical capital.

C) lends funds to purchase financial capital.

D) lends funds to purchase physical capital.

E) wants physical capital in order to purchase financial capital.

2) The demand for loanable funds includes demand for

i.loans.

ii.stocks.

iii.bonds.

A) i, ii and iii

B) i only

C) i and ii

D) iii only

E) ii and iii

3) In the loanable funds market, demanders of funds are ________ and suppliers of funds are ________.

A) firms and the government if it has a budget surplus; households and the government if it has a budget deficit

B) firms and the government if it has a budget deficit; households and the government if it has a budget surplus

C) households and the government if it has a budget surplus; firms and the government if it has a budget deficit

D) households and the government if it has a budget deficit; firms and the government if it has a budget surplus

E) households and firms; the government if it has a budget deficit

4) In the loanable funds market, which of the following is an example of investment demand?

A) Mary buying stocks for her retirement portfolio

B) George purchasing United States savings bonds for his son’s college fund

C) Scott purchasing a rookie-year baseball card for last year’s World Series MVP

D) Brian, owner of Bryan Games, purchasing computers to enhance the production of games

E) Mark buying rare gold coins

5) The opportunity cost of the financial resources used to finance the purchase of capital is

A) the real interest rate.

B) the supply of investment.

C) capital investment.

D) the quantity of investment demanded.

E) the price of the capital goods purchased.

6) ________ reflects a use of loanable funds, while ________ reflects a supply of loanable funds.

A) Business investment; the government budget deficit.

B) International investment; business investment.

C) The government budget deficit; private saving.

D) A government budget surplus; a government budget deficit.

E) International borrowing; a government budget deficit.

7) If a firm wants to borrow $10 million and the real interest rate increases from 5 percent to 6 percent, then the cost of the investment has increased by

A) $1 million per year.

B) $100,000 per year.

C) $6 million per year.

D) $600,000 per year.

E) nothing because the real interest rate is the return the firm will earn on its investment.

8) Other things remaining the same, as the real interest rate increases,

A) firms will borrow more funds.

B) firms will borrow less funds.

C) firms’ demand for funds will not change.

D) firms will purchase new capital with its own funds instead of taking a loan.

E) the demand for loanable funds curve shifts leftward.

9) Other things remaining the same, the ________ the real interest rate, the ________.

A) lower; greater the quantity of loanable funds demanded

B) lower; greater the demand for loanable funds

C) higher; greater the quantity of loanable funds demanded

D) higher; greater the demand for loanable funds

E) lower; greater the quantity of loanable funds supplied

10) Suppose the real interest rate increases from 4 percent to 6 percent. As a result,

A) governments decrease the quantity supplied of loanable funds.

B) firms increase their demand for loanable funds.

C) governments decrease their demand for loanable funds.

D) firms decrease the quantity demanded of loanable funds.

E) governments increase the supply of loanable funds.