Question 1

If Kelly deposits $10,000 into an account that pays 8 percent interest, compounded annually, and she makes no further deposits or withdrawals, how much will Kelly have in her account at the end of 5 years?

Accepted Answer

A)  $14,000
B)  $14,482
C)  $14,693
D)  $15,000E) C) and D)
F) A) and B)

Question 2

A normal profit is

Accepted Answer

A)  the average profitability of a firm over one complete business cycle.
B)  calculated by subtracting explicit costs from total revenue.
C)  the "price" required to retain entrepreneurial talent in some particular line of production.
D)  the amount by which total revenue exceeds total operating costs.E) B) and C)
F) B) and D)

Question 3

Suppose that interest payments are $280 per year on a $4,000 loan and $274 per year on an $5,479 loan. The interest rates on the two loans are

Accepted Answer

A)  decrease from G to F.
B)  increase from E to F.
C)  increase from B to C.
D)  decrease from B to A.E) A) and B)
F) None of the above

Question 4

In year 1 the price level is constant and the nominal rate of interest is 6 percent. But in year 2 the inflation rate is 3 percent. If the real rate of interest is to remain at the same level in year 2 as it was in year 1, then in year 2 the nominal interest rate must

Accepted Answer

A)  rise by 9 percentage points.
B)  rise by 3 percentage points.
C)  fall by 3 percentage points.
D)  rise by 6 percentage points.E) A) and B)
F) C) and D)

Question 5

The schedule shows various interest rates, the associated quantity demanded of loanable funds, and the quantity supplied of loanable funds in billions of dollars at those interest rates. At an interest rate of 8 percent, there will be

Accepted Answer

A)  an excess supply of loanable funds of 440 billion.
B)  an excess supply of loanable funds of 140 billion.
C)  an excess demand for loanable funds of 140 billion.
D)  an excess demand for loanable funds of 294 billion.E) A) and B)
F) C) and D)

Question 6

The quantity of loanable funds supplied is inversely related to the interest rate.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following factors is not a typical cause of changes in land rent?

Accepted Answer

A)  demand for land
B)  supply of land
C)  prices of the products produced from the land
D)  prices of other resources employed along with landE) A) and D)
F) A) and C)

Question 8

Answer the question using the table. Figures are in billions of dollars. If the government passes a usury law that sets the interest rate 2 percent below the market equilibrium, the interest rate will be

Accepted Answer

A)  6 percent.
B)  8 percent.
C)  10 percent.
D)  12 percent.E) None of the above
F) C) and D)

Question 9

The demand for land is

Accepted Answer

A)  perfectly elastic.
B)  perfectly inelastic.
C)  upsloping.
D)  downsloping.E) A) and D)
F) A) and C)

Question 10

Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan. The interest rates on the two loans are

Accepted Answer

A)  14 percent and 20 percent, respectively.
B)  14 percent and 14 percent, respectively.
C)  18.8 percent on both loans.
D)  1.4 percent and 11.8 percent, respectively.E) A) and B)
F) A) and C)

Question 11

The risk that the firm's employees might get hurt while working is an example of the uninsurable risks faced by an entrepreneur.

Accepted Answer

A) True 
 B)False

Question 12

If the interest rate is 15 percent, what is the future value of $10,000 two years from now?

Accepted Answer

A)  $13,225
B)  $225
C)  $13,000
D)  $7,576E) A) and D)
F) All of the above

Question 13

The supply of loanable funds is perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 14

The supply of loanable funds is an upward-sloping curve because the

Accepted Answer

A)  higher the interest rate, the more households consume and the more households save.
B)  higher the interest rate, the less households consume and the more households save.
C)  lower the interest rate, the more households consume and the more households save.
D)  lower the interest rate, the less households consume and the more households save.E) C) and D)
F) None of the above

Question 15

Changes in the equilibrium interest rate will

Accepted Answer

A)  affect both the size of the domestic output and the allocation of capital goods among industries.
B)  affect the size of the domestic output but not the allocation of capital goods among industries.
C)  affect the allocation of capital goods among industries but not the size of the domestic output.
D)  have no perceptible effect on either the size of the domestic output or the allocation of capital goods among industries.E) A) and B)
F) B) and D)

Question 16

Economic profit affects

Accepted Answer

A)  the allocation of resources but not the level of resource use.
B)  the level of resource use but not the allocation of resources.
C)  the allocation of resources and the level of resource use.
D)  neither the allocation of resources nor the level of resource use.E) A) and B)
F) C) and D)

Question 17

If the payment to an input is pure economic rent, then reducing that payment will

Accepted Answer

A)  not influence the availability of the input.
B)  increase the quantity supplied of the input.
C)  decrease the quantity supplied of the input.
D)  decrease the demand for the input.E) C) and D)
F) None of the above

Question 18

Effective usury laws cause

Accepted Answer

A)  a surplus of money in money markets.
B)  the quantity of money demanded to be brought into balance with the quantity supplied.
C)  the quantity of money supplied to exceed the quantity demanded.
D)  a shortage of money in money markets.E) All of the above
F) B) and D)

Question 19

Which of the following statements about economic profits is not correct?

Accepted Answer

A)  Economic profits act as a signal to producers who make decisions about how to allocate scarce resources.
B)  Economic profits are influenced by the degree of monopoly power.
C)  Economic profits represent a reward for risk taking.
D)  Economic profits are an explicit cost of production.E) All of the above
F) None of the above

Question 20

Refer to the table representing Kara's bank account. If the $4,000 was deposited into her account at the beginning of year 1 and no further deposits or withdrawals were made, the value for cell B

Accepted Answer

A)  cannot be determined.
B)  $4,494.40.
C)  $4,294.40.
D)  $4,734.40.E) A) and B)
F) B) and C)

Exam 18: Rent, Interest, and Profit

If the payment to an input is pure economic rent, then reducing that payment will

Correct AnswerverifiedShow Answer

In year 1 the price level is constant and the nominal rate of interest is 6 percent. But in year 2 the inflation rate is 3 percent. If the real rate of interest is to remain at the same level in year 2 as it was in year 1, then in year 2 the nominal interest rate must

Correct AnswerverifiedShow Answer

Which of the following statements about economic profits is not correct?

Correct AnswerverifiedShow Answer

Which of the following factors is not a typical cause of changes in land rent?

Correct AnswerverifiedShow Answer

The supply of loanable funds is perfectly elastic.

Correct AnswerverifiedShow Answer

If Kelly deposits $10,000 into an account that pays 8 percent interest, compounded annually, and she makes no further deposits or withdrawals, how much will Kelly have in her account at the end of 5 years?

Correct AnswerverifiedShow Answer

Economic profit affects

Correct AnswerverifiedShow Answer

If the interest rate is 15 percent, what is the future value of $10,000 two years from now?

Correct AnswerverifiedShow Answer

The supply of loanable funds is an upward-sloping curve because the

Correct AnswerverifiedShow Answer

Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan. The interest rates on the two loans are

Correct AnswerverifiedShow Answer

The quantity of loanable funds supplied is inversely related to the interest rate.

Correct AnswerverifiedShow Answer

The demand for land is

Correct AnswerverifiedShow Answer

A normal profit is

Correct AnswerverifiedShow Answer

Answer the question using the table. Figures are in billions of dollars. If the government passes a usury law that sets the interest rate 2 percent below the market equilibrium, the interest rate will be

Correct AnswerverifiedShow Answer

Refer to the table representing Kara's bank account. If the $4,000 was deposited into her account at the beginning of year 1 and no further deposits or withdrawals were made, the value for cell B

Correct AnswerverifiedShow Answer

Suppose that interest payments are $280 per year on a $4,000 loan and $274 per year on an $5,479 loan. The interest rates on the two loans are

Correct AnswerverifiedShow Answer

Effective usury laws cause

Correct AnswerverifiedShow Answer

Changes in the equilibrium interest rate will

Correct AnswerverifiedShow Answer

The risk that the firm's employees might get hurt while working is an example of the uninsurable risks faced by an entrepreneur.

Correct AnswerverifiedShow Answer

The schedule shows various interest rates, the associated quantity demanded of loanable funds, and the quantity supplied of loanable funds in billions of dollars at those interest rates. At an interest rate of 8 percent, there will be

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified