21) If government purchases are $400 million, taxes are $700 million, and transfers are $200 million, which of the following is true?

A) Public saving is $500 million.

B) The budget deficit is $100 million.

C) The budget deficit is $500 million.

D) Public saving is $100 million.

22) Which of the following will increase investment spending in the economy, holding everything else constant?

A) an increase in the federal government surplus

B) an increase in the budget deficit

C) an increase in consumer dissavings

D) an increase in transfer payments

23) Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds.

A) demanders; suppliers

B) suppliers; demanders

C) suppliers; suppliers

D) demanders; demanders

24) The demand for loanable funds is downward sloping because the ________ the interest rate, the ________ the number of profitable investment projects a firm can undertake, and the ________ the quantity demanded of loanable funds.

A) lower; greater; greater

B) lower; smaller; greater

C) greater; greater; greater

D) greater; smaller; greater

25) If Ebenezer Scrooge spends rather than saves his vast wealth, he will

A) slow economic growth because he is reducing the amount of funds available for investment.

B) slow economic growth because he is increasing the amount of funds available for investment.

C) promote economic growth because he is increasing the amount of funds available for investment.

D) promote economic growth because he is decreasing the amount of funds available for investment.

26) A government budget surplus from reduced government spending (no change in net taxes) will ________ the level of investment in the economy and ________ the level of saving (private plus public) in the economy.

A) increase; decrease

B) increase; increase

C) decrease; increase

D) decrease; decrease

27) If consumers decide to be more frugal and save more out of their income, then this will cause

A) a shift in the supply curve for loanable funds to the right.

B) a shift in the supply curve for loanable funds to the left.

C) a movement to the right along the supply curve for loanable funds.

D) a movement to the left along the supply curve for loanable funds.

28) An increase in the demand for loanable funds will occur if there is

A) an increase in the real interest rate.

B) a decrease in the real interest rate.

C) an increase in expected profits from firm investment projects.

D) an increase in the nominal interest rate accompanied by an equal increase in inflation.

29) Which of the following would you expect to increase the equilibrium interest rate?

A) an increase in the percentage of income after net taxes that households save

B) an increase in the budget deficit

C) a decrease in the profitability of investment projects firms are considering

D) a change from an income tax to a consumption tax

21) If government purchases are $400 million, taxes are $700 million, and transfers are $200 million, which of the following is true?

A) Public saving is $500 million.

B) The budget deficit is $100 million.

C) The budget deficit is $500 million.

D) Public saving is $100 million.

22) Which of the following will increase investment spending in the economy, holding everything else constant?

A) an increase in the federal government surplus

B) an increase in the budget deficit

C) an increase in consumer dissavings

D) an increase in transfer payments

23) Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds.

A) demanders; suppliers

B) suppliers; demanders

C) suppliers; suppliers

D) demanders; demanders

24) The demand for loanable funds is downward sloping because the ________ the interest rate, the ________ the number of profitable investment projects a firm can undertake, and the ________ the quantity demanded of loanable funds.

A) lower; greater; greater

B) lower; smaller; greater

C) greater; greater; greater

D) greater; smaller; greater

25) If Ebenezer Scrooge spends rather than saves his vast wealth, he will

A) slow economic growth because he is reducing the amount of funds available for investment.

B) slow economic growth because he is increasing the amount of funds available for investment.

C) promote economic growth because he is increasing the amount of funds available for investment.

D) promote economic growth because he is decreasing the amount of funds available for investment.

26) A government budget surplus from reduced government spending (no change in net taxes) will ________ the level of investment in the economy and ________ the level of saving (private plus public) in the economy.

A) increase; decrease

B) increase; increase

C) decrease; increase

D) decrease; decrease

27) If consumers decide to be more frugal and save more out of their income, then this will cause

A) a shift in the supply curve for loanable funds to the right.

B) a shift in the supply curve for loanable funds to the left.

C) a movement to the right along the supply curve for loanable funds.

D) a movement to the left along the supply curve for loanable funds.

28) An increase in the demand for loanable funds will occur if there is

A) an increase in the real interest rate.

B) a decrease in the real interest rate.

C) an increase in expected profits from firm investment projects.

D) an increase in the nominal interest rate accompanied by an equal increase in inflation.

29) Which of the following would you expect to increase the equilibrium interest rate?

A) an increase in the percentage of income after net taxes that households save

B) an increase in the budget deficit

C) a decrease in the profitability of investment projects firms are considering

D) a change from an income tax to a consumption tax

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