Question : 51) Consider the market for financial capital in the long : 1384431

51) Consider the market for financial capital in the long run. The national saving curve is upward sloping because an increase in the real interest rate

A) leads households to increase their current consumption.

B) leads to an increase in investment demand.

C) decreases the supply of public saving.

D) leads households to reduce their current consumption.

E) decreases the supply of private saving.

52) Consider the market for financial capital in the long run. The investment demand curve is downward sloping because

A) an increase in the real interest rate leads to an increase in investment demand.

B) all components of desired investment are negatively related to the real interest rate.

C) all components of desired investment are positively related to the real interest rate.

D) a decrease in the real interest rate reflects a higher opportunity cost to firms of using financial capital.

E) an increase in the real interest rate reflects a lower opportunity cost to firms of using financial capital.

53) Refer to Figure 26-2. Suppose national saving is reflected by NS0 and investment demand is reflected by I0D. If the real interest rate is i1, there is ________ which will drive the interest rate down until it reaches i*. 

A) an excess demand for financial capital

B) an excess demand for investment

C) an excess supply of financial capital

D) an excess supply of public saving

54) Refer to Figure 26-2. Suppose national saving is reflected by NS0 and investment demand is reflected by I0D. If the real interest rate is i4, there is ________, which will drive the real interest rate up to i*.

A) an excess demand for financial capital

B) an excess supply of financial capital

C) an excess supply of saving

D) an excess demand for public saving

55) Refer to Figure 26-2. Suppose national saving is reflected by NS0 and investment demand is reflected by I0D. Now suppose there is a reduction in government purchases (G). What is the effect on the equilibrium real interest rate?

A) There is no effect on NS or ID, and the interest rate remains at i*.

B) National saving shifts to NS1 and the interest rate falls to i3.

C) Investment demand shifts to I1D, and the interest rate rises to i2.

D) The real interest rate rises because of the decrease in the budget surplus.

E) The real interest rate falls because of the decrease in the budget surplus.

56) Refer to Figure 26-2. Suppose national saving is reflected by NS0 and investment demand is reflected by I0D. Now suppose there is a reduction in government purchases. What is the effect on investment demand?

A) National saving shifts to NS1, causing an increase in the quantity of investment demanded from I* to I2.

B) There is no effect on NS or ID, and the quantity of investment demanded remains at I*.

C) Investment demand shifts to I1D, causing an increase in the quantity of investment demanded from I* to I1.

D) Investment demand shifts to I1D, causing an increase in the quantity of investment demanded from I* to I3.

E) National saving shifts to NS1, and investment demand shifts to I1D, causing an increase in the quantity of investment demanded from I* to I3.

57) Refer to Figure 26-2. Suppose national saving is reflected by NS0 and investment demand is reflected by I0D. Now suppose the government implements a revenue-neutral tax policy that encourages investment. What is the effect on the real interest rate?

A) There is no effect on NS or ID, and the interest rate remains at i*.

B) National saving shifts to NS1, and the real interest rate falls to i3.

C) The real interest rate rises because of the decrease in the budget surplus.

D) The real interest rate falls because of the decrease in the budget surplus.

E) Investment demand shifts to I1D, and the real interest rate rises to i2.

58) Refer to Figure 26-2. Suppose national saving is reflected by NS0 and investment demand is reflected by I0D. Now suppose the government implements a revenue-neutral tax policy that encourages investment. What is the effect on the quantity of national saving?

A) There is no effect on NS or ID and the quantity of national saving supplied remains at I*.

B) National saving shifts to , and the quantity of national saving supplied rises to I2.

C) Investment demand shifts to I1D and the quantity of national saving supplied rises to I1.

D) Investment demand shifts to I1D, national saving shifts to NS1, and the quantity of national saving rises to I3.

E) National saving shifts to , investment demand shifts to I1D, and the quantity of national saving rises to .

59) Refer to Figure 26-3. The equilibrium interest rate in this market is ________% and the equilibrium flow of investment and saving is ________ billion dollars.

A) 1; 50

B) 2; 60

C) 3; 70

D) 4; 80

E) 5; 90

60) Refer to Figure 26-3. Suppose the interest rate in this market for financial capital is 2%. In this case there is an excess ________ financial capital of ________ billion dollars.

A) supply of; 30

B) demand for; -30

C) supply of; 50

D) demand for; 30

E) demand for; 80