Question :
91) Refer to Figure 15-3. Suppose the current equilibrium in : 1384304
91) Refer to Figure 15-3. Suppose the current equilibrium in the market for financial capital is at point A. Which of the following events is likely to move the equilibrium to point C?
A) an increase in the interest rate and simultaneous technological improvement
B) a decrease in the interest rate
C) population growth and a simultaneous increase in the marginal product of capital
D) population growth and a simultaneous reduction in the marginal product of capital
E) population growth and a technological improvement
92) The Canadian government introduced the Tax-Free Savings Account (TFSA) in 2009, which allows Canadians to earn tax-free investment returns on a limited amount of savings each year. In theory, and all else remaining equal, what do we expect the effect of such a policy to be on the market for financial capital?
A) The investment demand curve shifts right, the equilibrium interest rate rises and investment rises.
B) The investment demand curve shifts left, the equilibrium interest rate falls and investment falls.
C) The supply of savings curve shifts right, the equilibrium interest rate falls and investment increases.
D) The supply of saving curve shifts left, the equilibrium interest rate rises and investment decreases.
E) There will be no effect on the market for financial capital.
93) The Canadian government introduced the Tax-Free Savings Account (TFSA) in 2009, which allows Canadians to earn tax-free investment returns on a limited amount of savings each year. What is the underlying goal of such a government policy?
A) to decrease the supply of financial capital to the economy
B) to increase government tax revenues
C) to maintain upward pressure on the equilibrium interest rate
D) to increase investment demand of Canadian firms
E) to increase desired saving of Canadian households
94) The Canadian government introduced the Tax-Free Savings Account (TFSA) in 2009, which allows Canadians to earn tax-free investment returns on a limited amount of savings each year. One objective is to increase the total supply of saving in the economy. Why might a policy such as this not have the desired effect on the economy?
A) The supply of saving will increase only in response to an increase in the pre-tax interest rate.
B) The supply of saving will increase only in response to a decrease in the interest rate.
C) The funds deposited to a TFSA could simply be substituted from other saving that would happen anyway.
D) The supply of savings in general can increase only by income growth or population growth.
E) The introduction of TFSAs will divert financial capital away from saving and toward investment.
95) In recent decades the economy has experienced dramatic technological improvement in many types of capital equipment. All else remaining equal, this change has the effect of shifting the investment demand curve to the ________ and causing an excess ________ capital, and thus a ________ in the equilibrium interest rate.
A) right; supply of; rise
B) right; demand for; rise
C) left; demand for; rise
D) left; supply of; fall
E) right; demand; fall
96) Consider the flow of investment and saving in a small economy. Suppose the equilibrium interest rate is 2.5% and the equilibrium level of saving and investment is $4 billion. Now suppose, all else remaining equal, that there is sustained population growth over several years. What will be the effect in the capital market?
A) An increase in the flow of investment and saving and an indeterminate effect on the equilibrium interest rate.
B) An increase in the flow of investment and saving and an increase in the equilibrium interest rate.
C) An increase in the flow of investment and saving and a decrease in the equilibrium interest rate.
D) An indeterminate effect on the flow of investment and saving and a decrease in the equilibrium interest rate.
E) An indeterminate effect on the flow of investment and saving and an increase in the equilibrium interest rate.
97) Consider the flow of investment and saving in a small economy. Suppose the equilibrium interest rate is 2.5% and the equilibrium level of saving and investment is $4 billion. Now suppose, all else remaining equal, that there is an increase in per capita income. What will be the effect in the capital market?
A) the interest rate will fall below 2.5% and the quantity of investment demanded will increase
B) the interest rate will rise above 2.5% and the quantity of saving supplied will increase
C) the interest rate will rise above 2.5% and the quantity of investment demanded will decrease
D) an indeterminate effect on the interest rate and an increase in the equilibrium level of investment and saving
E) the interest rate will fall below 2.5% and the quantity of saving supplied will increase
98) Ongoing technological improvement over the past four decades in Canada has led to continual increases in investment demand, and an increase in the flow of investment, but no clear trend in the interest rate. The reason that we have not seen continual increases in the interest rate over this time period is that
A) natural forces in the economy cause the investment demand curve to shift left to eliminate the excess demand for capital.
B) the supply of saving curve shifts to the left in response to the increases in investment demand.
C) the government intervenes in the capital market.
D) technological change has also led to rising productivity and rising incomes and therefore an increase in the supply of saving.
E) the annual flow of investment is large enough to offset any change in the interest rate.
99) Over the past four decades, Canada’s non-residential capital stock has increased at an average annual growth rate of approximately ________%.
A) 3
B) 6
C) 9
D) 12
E) 15
100) The Canadian federal government can encourage a rightward shift of the investment demand curve with which of the following policies:
1) an increase in corporate income-tax rates;
2) providing interest-rate subsidies on loans to firms;
3) decreasing the interest rate.
A) 1 only
B) 2 only
C) 3 only
D) 1 and 2
E) 2 and 3
