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Liberty University ECON 214 exam 3 complete solutions correct answers A+ work

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Liberty University ECON 214 exam 3 complete solutions correct answers A+ work

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Question 1 During the Great Recession, government outlays were _________ and government revenues were _________ their longrun averages over the period 1960–2012.

Question 2 Use the following example to answer the questions that follow: Imagine that you deposit $25,000 in currency (which you had been storing in your closet), into your checking account at the bank. Assume that this institution has a required reserve ratio of 25%. As a result of this deposit, by how much will the bank’s excess reserves increase?

Question 3 Which federal budget category’s portion of total government outlays has decreased since 1960?

Question 4 A budget is:

Question 5 You receive a $1,000 check from your parents for your birthday, and you deposit this in a bank that faces a 10% reserve ratio. What is the consequence if the bank then deposits your check at the Federal Reserve?

Question 6 The federal budget deficit has grown so quickly in the past 5–10 years because of:

Question 7 Why did tax revenues fall so sharply after 2007?

Question 8 Refer to the following figure to answer the questions that follow According to the figure, if the government increases spending by only $4 billion in an effort to shift aggregate demand enough to return to longrun equilibrium, the marginal propensity to consume must be equal to:

Question 9 Refer to the following table to answer the questions that follow. Using the table, what is the value of M2 that is not part of M1?

Question 10 If Ann were to convert some of her checkable deposits into a certificate of deposit, which of the following changes would take place?

Question 11 Which of the following diagrams shows what supplyside fiscal policy initiatives try to do to the longrun aggregate supply curve?

Question 12 When an economy experiences inflation, the value of money:

Question 13 Assume that the government is currently balancing the national budget so that outlays equal tax revenue. Then the economy starts into an expansion, and the government decides to decrease government spending by $50 billion. As a result:

Question 14 How is owner’s equity calculated?

Question 15 If the marginal propensity to consume is equal to 0.75, the spending multiplier is equal to:

Question 16 A marginal tax rate is:

Question 17 If current savings increases the same amount as the federal stimulus:

Question 18 Some people argue that social insurance taxes should be increased to remedy the fiscal problems faced by Social Security. What is a potential unintended consequence of this proposed solution?

Question 19 Assume that the government is currently balancing the national budget so that outlays equal tax revenue. Then the economy slips into recession, and the government decides to increase government spending by $50 billion. The government must pay for this by borrowing; it must sell $50 billion worth of Treasury bonds. As a result:

Question 20 In a fiat money economy, M1 includes currency as well as:

Question 21 One proposed solution to the funding problems faced by Social Security and Medicare is to implement meanstesting, so that only those with limited retirement funds would qualify for the government benefits. An unintended consequence of such a requirement may be:

Question 22 Monetary policy is:

Question 23 What is true about banks in a fractional reserve banking system?

Question 24 Federal government spending has grown quickly since 2007 primarily because of:

Question 25 The x axis for the Laffer curve represents:

Question 26 _____________ would be considered a mandatory outlay in your monthly budget.

Question 27 When gasoline gallons are priced in terms of number of seashells, seashells serve as:

Question 28 If a bank has a required reserve ratio of 15% and has required reserves of $225,000,000, how much does the bank hold in deposits?

Question 29 The purchase of existing U.S. Treasury securities by the Federal Reserve:

Question 30 Which of the following is an example of crowdingout?

Question 31 At ___________ tax rates, ___________ in those tax rates lead to ___________ in total tax revenue.

Question 32 Refer to the following table to answer the questions that follow. Using the table, what is the value of M1?

Question 33 Fiscal policy includes:

Question 34 Which of the following statements about traveler’s checks is true?

Question 35 In which of the following situations does money serve as a store of value?

Question 36 Which of the following would be the theoretical outcome of contractionary fiscal policy in the following aggregate demand–aggregate supply model, where LRAS is longrun aggregate supply and SRAS is shortrun aggregate supply?

Question 37 As part of the Economic Stimulus Act of 2008, the typical family of four received:

Question 38 The first of two significant fiscal policy initiatives enacted by the government during the Great Recession, signed in February 2008 by President George W. Bush, was the:

Question 39 Government programs that automatically implement countercyclical fiscal policy in response to economic conditions are called:

Question 40 An illustration of the relationship between tax rates and tax revenues is called:

Question 1 Using a credit card is most like:

Question 2 The bank in your hometown has decided to double the number of its local branch offices. How will this affect the bank’s balance sheet?

Question 3 A U.S. federal government budget deficit occurs when:

Question 4 Suppose you land a job with Google right out of college. Your economics training is very valuable to them, so you receive a starting annual salary of $65,000. What is the total amount of social insurance taxes you will be responsible for after your first year of work?

Question 5 An example of the multiplier effect is when:

Question 6 The funds used for payments to Medicare recipients come primarily from:

Question 7 If the marginal propensity to consume is equal to 0.75, the spending multiplier is equal to:

Question 8 Refer to the following table to answer the questions that follow. Using the table, what is the marginal income tax rate of a $5,000 raise for someone who currently makes $85,650 per year?

Question 9 Which of the following is NOT considered part of M2?

Question 10 A budget is:

Question 11 The first of two significant fiscal policy initiatives enacted by the government during the Great Recession, signed in February 2008 by President George W. Bush, was the:

Question 12 By 1918, the top marginal income tax rate in the United States rose to:

Question 13 Why would a government want to use expansionary fiscal policy to help stimulate aggregate demand if, in the long run, we would expect prices to adjust and the economy to return to its longrun equilibrium on its own?

Question 14 What function of money is highlighted when I put cash under my mattress to have on hand for unexpected emergencies?

Question 16 The Laffer curve is:

Question 17 Supplyside fiscal policy involves the use of:

Question 18 The largest component of M2 is:

Question 19 Use the following example to answer the questions that follow: Imagine that you deposit $25,000 in currency (which you had been storing in your closet), into your checking account at the bank. Assume that this institution has a required reserve ratio of 25%. As a result of this deposit, by how much will the bank’s required reserves increase?

Question 20 An implementation lag happens because:

Question 21 Some proponents of entitlementprogram reform suggest indexing Social Security benefits to the consumer price index (CPI):

Question 22 Which of the following would NOT increase the supply of money in a fiat money economy?

Question 23 If the required reserve ratio is 10%, what is the simple deposit multiplier?

Question 24 What are federal funds?

Question 25 Use the following table to answer the questions that follow. According to the table, which country appeared to be in the best fiscal shape in 2012?

Question 27 In economic terms, how would you state what has happened when your neighbor says he is unwilling to help you mow your lawn because you are unwilling to help him teach his kids how to speak with a British accent?

Question 28 One argument for tax cuts when the government is running a budget deficit is:

Question 29 For something to be considered money, it must:

Question 30 Refer to the following table to answer the questions that follow. Using the table, what is the value of M2 that is not part of M1?

Question 31 Fiscal policy includes:

Question 32 ___________ is an example of an automatic stabilizer.

Question 33 A marginal tax rate is:

Question 34 Fiscal policy is:

Question 35 The “crowdingout” critique is based on the idea that:

Question 36 The United States has a:

Question 37 According to the U.S. Federal Tax Rates chart from the textbook (Figure 15.6), a person earning $100,000 in a given year is in the 28% tax bracket. How much will this individual owe in taxes for that year?

Question 38 Social Security and Medicare spending continue to grow and take up larger shares of the federal budget because:

Question 39 A progressive income tax system is one in which:

Question 40 In most nations, one or more governing bodies must approve government spending or new tax policies. This causes ___________ between setting fiscal policy and seeing its effects.

1. The highest marginal tax rate in U.S. history was:

2. The highest marginal tax rate in 1913 was:

3. By 1918, the top marginal income tax rate in the United States rose to:

4. The United States has a:

5. According to the table, the country with the highest average yearly budget deficit over the time period as a percentage of the yearly increase in GDP is:

6. According to the table, the country with the largest decrease in the debt-to-GDP ratio over the time period is:

7. According to the table, which country appeared to be in the worst fiscal shape in 2012?

8. According to the table, which country appeared to be in the best fiscal shape in 2012?

9. Reforming entitlement programs is difficult because:

10. One proposed solution to the funding problems faced by Social Security and Medicare is to increase the retirement age from 67 to 70. Although this would mean billions of dollars in savings for these federal programs, an unintended consequence may be:

11. A progressive income tax system is one in which:

12. Why do wealthy citizens contribute much more tax revenues to the government than poor citizens?

13. A U.S. federal government budget surplus occurs when:

14. Over the next 20 years, the number of workers per Social Security beneficiary is predicted to be:

15. A marginal tax rate is:

16. Suppose you return to college and earn an MBA, after which you get an upper-management position with Yum! Brands. If your starting salary is $125,000, and the percentages are the same as they were in 2012, how much will you owe in Social Security taxes?

17. The poorest 40% of households in the United States:

18. Which federal budget category’s portion of total government outlays has decreased since 1960?

19. What would happen if a country defaulted on its sovereign debt?

20. Discretionary government spending includes payments made for:

21. Using the table, what is the marginal income tax rate of a $5,000 raise for someone who currently makes $67,000 per year?

22. Using the table, what is the marginal income tax rate of a $5,000 raise for someone who currently makes $85,650 per year?

23. Using the table, what is the total payroll tax bill (assume zero state and local income taxes) for someone who makes $67,000 per year?

24. Using the table, what is the new average tax rate for a person who currently makes $80,000 per year and receives a $10,000 raise?

25. The funds used for payments to Medicare recipients come primarily from:

26. Which of the following is not a revenue source for the U.S. federal government?

27. Which of the following is considered discretionary government spending?

28. Payroll taxes:

29. Suppose you land a job with Google right out of college. Your economics training is very valuable to them, so you receive a starting annual salary of $65,000. What is the total amount of social insurance taxes you will be responsible for after your first year of work?

30. Suppose you graduate with an accounting degree and then become a certified public accountant. You work for a big firm, but are offered a chance to prepare tax documents for your city government as an independent contractor. The city offers to pay you a consulting fee of $10,000. When deciding whether to accept the additional work, the most important tax factor in your decision is:

31. Why do Social Security and Medicare pose problems for the federal government budget?

32. Suppose you are offered a job with Amazon upon graduation. Your starting salary will be $70,000, which will put you in the 25% federal income tax bracket. The total amount of income taxes you pay is $13,530. Your average tax rate is approximately:

33. Why was the world so concerned about Greece defaulting on its debt?

34. The austerity measures imposed on Greece in 2011:

35. the most relevant tax rate for making decisions about earning additional income is the:

36. Why is a budget deficit not necessarily a bad thing?

37. According to the U.S. Federal Tax Rates chart from the textbook (Figure 15.6), a person earning $100,000 in a given year is in the 28% tax bracket. How much will this individual owe in taxes for that year?

38. Some people argue that social insurance taxes should be increased to remedy the fiscal problems faced by Social Security. What is a potential problem with this proposed solution?

39. The number of workers per Social Security beneficiary in 1960 was approximately:

40. The government withdraws social insurance taxes from the paychecks of workers to:

41. Which of the following might be a good reason for running a budget deficit?

42. In 2012, revenue from corporate income taxes totaled approximately:

43. What is the most appropriate way to compare budget deficits/surpluses across time?

44. Excise taxes are levied on:

45. Budget deficits tend to:

46. Why are interest payments considered mandatory spending in the federal budget?

47. The U.S. government could reduce its budget deficit by:

48. Some proponents of entitlement-program reform suggest indexing Social Security benefits to the consumer price index (CPI):

49. ____________ a government-administered retirement program.

50. Social Security and Medicare are funded by the collection of:

51. The most recent federal budget surplus occurred:

52. The federal government started running a budget surplus in 1998. By 2002, the budget surplus had turned into a budget deficit. Why do you think the budget deficit returned in 2002?

53. Social Security and Medicare spending continue to grow and take up larger shares of the federal budget because:

54. Which country faces the most severe fiscal challenges—in terms of debt-to-GDP ratio—according to the accompanying table?

55. Why is foreign government ownership of U.S. debt not currently a huge concern among many economists?

Question 1 The federal government started running a budget surplus in 1998. By 2002, the budget surplus had turned into a budget deficit. Why do you think the budget deficit returned in 2002? .

Question 3 Refer to the following table to answer the questions that follow. Using the table, what is the value of M1?

Question 4 The Federal Reserve System was created in:

Question 7 If an initial increase in government spending of $100 billion leads to a total increase of $400 billion in income, the marginal propensity to consume in the economy is:

Question 11 In a fiat money economy, money is created when:

Question 12 At ___________ tax rates, ___________ in those tax rates lead to ___________ in total tax revenue.

Question 13 The y axis for the Laffer curve represents:

Question 14 When money is acting as a medium of exchange, it:

Question 15 Which of the following is not a characteristic of fiat money?

Question 22 In reality, individuals do not deposit all of their cash into the banking system. Consequently:

Question 24 ___________ is an example of an automatic stabilizer.

Question 27 Time lags, crowdingout, and savings shifts are all:

Question 33 The new classical critique of fiscal policy asserts that:

Question 39 In which of the following situations does money serve as a store of value?

Refer to the following graph to answer the questions that follow:

____ 13. Assuming the figure represents the market for loanable funds, it would be true that:

line 1 represents savings (supply), and line 2 represents investment (demand).

the vertical axis represents the interest rate, and the distance between points C and D represents the surplus of loanable funds at interest rate A.

line 1 represents investment demand, and line 2 represents savings.

the vertical axis represents the quantity of funds lent and borrowed, whereas the distance between points C and D represents the shortage of loanable funds at interest rate A.

line 1 represents the interest rate, and line 2 represents the quantity of savings.

____ 14. Smiley Myrus owns a large corporation that is building a new shopping mall in Winston-Salem, North Carolina. In all likelihood:

Smiley’s firm is a supplier of loanable funds.

Smiley’s firm pays a higher rate of interest than most borrowers, based on the Fisher equation.

Smiley’s firm is a borrower of loanable funds.

Smiley’s firm pays a lower rate of interest than most borrowers, based on the Fisher equation.

Smiley’s firm would loan its profits to foreign entities.

____ 15. The interest rate is:

the price of money.

only a cost to savers.

a return to borrowers.

both a cost to savers and a return to borrowers.

both a return to savers and a cost to borrowers.

____ 16. An interest rate best represents _______________ to borrowers and _______________ to savers.

cost; return

return; cost

rate of change; static value

static value; rate of change

nominal return; real return

____ 17. You are thinking about buying a new car and will borrow $20,000 for this purchase at a 5% fixed rate for exactly one year. The lender (correctly) assumes that inflation will be 2% this year. Based on the above information and assuming you adhere to the terms of the loan:

you will pay back the lender exactly $20,000, which will represent $19,000 of purchasing power.

you will pay back the lender exactly $21,000, which will represent $21,000 of purchasing power.

you will pay back the lender exactly $21,000, which will represent $21,400 of purchasing power.

you will pay back the lender exactly $21,000, which will represent $20,600 of purchasing power.

you will pay back the lender exactly $19,600, which will represent $20,000 of purchasing power.

____ 18. If the federal government taxes the interest rate that savers receive:

the rate of return to savers increases because of transfer payments and people save more.

the demand for loanable funds increases.

the supply of loanable funds increases.

the supply of loanable funds decreases.

corporations are more willing to borrow.

____ 19. You borrow $10,000 today at a nominal rate of 5%; inflation for the past 10 years has been exactly 2%. Today, inflation instantly rises to 4% and stays that way for the duration of your loan. Based on the above information and all else being equal, today:

you are worse off because inflation has risen.

you are better off strictly because 5% is still more than 4%.

you are better off because you are paying back the loan with dollars that represent less purchasing power today than the dollars you borrowed before.

the lender is better off because the real rate of interest automatically increases when inflation increases.

both you and the lender are better off because real rates fall when inflation rises.

____ 20. If interest rates rise, holding all else constant, this would cause:

an increase in both the demand and supply of loanable funds.

a decrease in both the demand and supply of loanable funds.

an increase in the supply of loanable funds but a decrease in the demand for loanable funds.

an increase in the quantity supplied of loanable funds but a decrease in the quantity demanded of loanable funds.

an increase in the supply of loanable funds but a decrease in the demand for loanable funds.

____ 21. The Fisher equation:

relates time preferences to the level of borrowing.

relates nominal interest rates to the level of borrowing.

relates real interest rates to the level of borrowing.

relates real interest rates, nominal interest rates, and inflation.

relates real interest rates, nominal interest rates, and the level of saving.

____ 22. The interest rate represents:

the opportunity cost of saving.

the opportunity cost of consumption.

the opportunity cost of saving plus the opportunity cost of inflation.

only the opportunity cost of taking a different job.

the price of savings, but not investment.

____ 23. The largest inflationary gap appeared:

in the 1960s.

in the 1950s during the great U.S. hyperinflation.

at the end of the 1970s and in the early 1980s.

during the Great Recession of 2007–2009.

in the 1990s.

____ 24. The real interest rate in 2012 was:

about 9%.

about 7%.

about 5%.

about 3%.

a negative number.

____ 25. Assuming inflation is positive, the real interest rate:

must always be larger than the nominal interest rate.

must always be smaller than the nominal interest rate.

could be larger or smaller than the nominal interest rate depending on the rate of inflation.

would normally be larger than the nominal interest rate.

increases exactly as fast as inflation.

____ 26. Assume deflation is occurring in a nation; the implication(s):

are that both real and nominal interest rates are positive.

are that both real and nominal interest rates are negative.

is that the nominal interest rate exceeds the real interest rate.

is that the real rate of interest exceeds the nominal rate of interest.

is that time preferences in the nation have fallen.

____ 27. Inflation reached its peak (of at least 14%) in the late 1970s/early 1980s. If this statement is true, then:

it is certain the real rate of interest was greater than the nominal rate.

it is certain the nominal rate of interest was greater than the real rate.

borrowers would borrow more because, automatically, real rates would fall.

the real rate of interest must have been constant, even if the nominal rate varied because of consumption smoothing.

if higher nominal rates were charged, it would be certain that higher real rates would be received.

____ 28. Which combination of events could have caused the equilibrium interest rate to rise and the equilibrium quantity of loanable funds (both borrowed and lent) to fall?

A baby boom begins, and investor confidence falls.

A baby boom begins, and investor confidence rises.

People have lower time preferences, and governments run larger deficits.

People have lower time preferences, and capital is more productive.

A baby boom begins, and people have higher time preferences.

____ 29. If household wealth rises and capital becomes less productive, we would correctly say that:

the new equilibrium quantity of loanable funds would decrease, but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.

the new equilibrium quantity of loanable funds would increase, but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.

the new equilibrium quantity of loanable funds would be indeterminate, but we would be certain the new equilibrium interest rate would be higher than the original.

the new equilibrium quantity of loanable funds would be indeterminate, but we would be certain the new equilibrium interest rate would be less than the original.

based on this information and because both changes would affect the demand for loanable funds in the opposite way, we would be unable to say anything about the relationship of the new equilibrium interest rate and quantity to the original interest rate and quantity.

____ 30. If foreign entities save less and governments run more deficits, we would correctly say that:

the new equilibrium quantity of loanable funds would decrease, but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.

the new equilibrium quantity of loanable funds would increase, but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.

the new equilibrium quantity of loanable funds would be indeterminate, but we would be certain the new equilibrium interest rate would be higher than the original.

the new equilibrium quantity of loanable funds would be indeterminate, but we would be certain the new equilibrium interest rate would be less than the original.

____ 31. By 1981:

interest rates were about 5%.

interest rates were about 7%.

interest rates were about 15%.

the real interest rate was negative.

the real interest rate was positive, but the nominal interest rate was less than the real rate.

Refer to the following graph to answer the questions that follow:

____ 32. Assuming the figure represents the market for loanable funds, which of the following would represent the government running a larger budget deficit?

a shift from line 1 to line 4

a shift from line 4 to line 1

a shift from line 2 to line 3

a shift from line 3 to line 2

a new shortage of loanable funds represented by the distance from C to D

____ 33. Assuming the figure represents the market for loanable funds, which of the following would represent a general economic collapse in the United States, causing foreigners to become fearful about the U.S. economy?

a shift from line 1 to line 4

a shift from line 3 to line 2

a shift from line 2 to line 3

a shift from line 4 to line 1

a new shortage of loanable funds represented by the distance from C to D

____ 34. If foreign income and wealth decrease, this would most likely:

not affect the market for loanable funds.

cause the supply of loanable funds to increase.

cause the supply of loanable funds to decrease.

cause the demand for loanable funds to increase in order for foreigners to maintain consumption.

cause the demand for loanable funds to decrease.

____ 35. A non-price determinant of the supply of loanable funds would be:

the interest rate.

business future profit expectations.

governments running higher deficits.

a change in the level of household time preferences.

better technology.

____ 36. Those with the least patience:

have the greatest time preference.

have the least time preference.

will demand a higher nominal interest rate but not a higher real rate.

will save the most.

will engage in the most consumption smoothing.

____ 37. Your roommate arrives home and says, “I am so hungry, I would give up my iPhone for a bowl of chili right now.” You say, “Here is the chili—let’s trade.” Based on this information:

you have a lower time preference than your roommate because you get the iPhone now.

you have a lower time preference than your roommate because he gets the chili now.

the one willing to accept a lower nominal interest rate has a higher time preference.

your roommate would be a borrower and you a lender.

your roommate would engage in consumption smoothing but you would not.

____ 38. T. D. Goneworth, a financial services firm, makes people want their money and want it now. If the firm is successful in advertising this message and convinces people to believe it, then, all else equal:

T. D. Goneworth has caused people to increase their consumption smoothing.

T. D. Goneworth has caused people to reduce their time preferences.

T. D. Goneworth has equalized the real and nominal rates of interest.

T. D. Goneworth has increased the rate of inflation.

T. D. Goneworth has caused people to increase their time preferences.

____ 39. Assume an epidemic hits a nation hard. As a result, people now have lower life expectancies. The most likely result would be:

a higher supply of loanable funds.

a higher demand for loanable funds.

a lower supply of loanable funds.

higher productivity of capital.

a decrease in equilibrium interest rates.

____ 40. If life expectancy falls due to AIDS and other diseases, we would expect:

time preference to fall and savings to increase.

time preference to rise and savings to increase.

time preference to fall and savings to decrease.

time preference to rise and savings to decrease.

interest rates to fall to zero.

____ 41. Most people have a time preference. Since this is true:

they must earn interest to consume now (save later) and are willing to pay interest to consume later (save now).

they must be paid interest to consume later (save now) and are willing to pay interest to consume now (save later).

they are willing to accept simple interest in the short run but only compound interest in the long run.

they will accept positive rates of interest on checking accounts and negative rates of interest on savings accounts.

they prefer more free time to less free time.

____ 42. If time preferences increase:

the demand for loanable funds will increase.

the demand for loanable funds will decrease.

the supply of loanable funds will increase.

the supply of loanable funds will decrease.

wealth will increase.

____ 43. When people withdraw funds from their savings, economists call this:

irrational.

dissaving.

disspending.

consumption smoothing.

the wealth effect.

____ 44. The notion of consumption smoothing means:

people tend to spend about the same amount each month.

people tend to spend about the same amount each year, and if more is spent this year than in the past, they would tend to spend less next year.

consumption varies less than income over a person’s lifetime. In early life people tend to borrow, in late life people tend to dissave, but in their middle years they tend to save.

consumption patterns tend to correlate perfectly with income. People spend the exact amount of their income over their lifetime.

consumption tends to vary more than income over a person’s lifetime. Although people should smooth their consumption over the years, they don’t. If consumption were smoothed, people would be better off.

____ 45. If the demographics of a nation change and the average age of the nation is approaching middle age, we would expect:

savings to increase.

savings to decrease.

borrowing to decline.

consumption variation to increase.

savings as a percentage of income to fall.

____ 46. An increase in the supply of loanable funds means:

borrowers want to borrow more at every interest rate.

savers want to borrow more at every interest rate.

borrowers want to borrow more at a specific interest rate.

savers want to save more at a specific interest rate.

savers want to save more at every interest rate.

____ 47. If the U.S. economy experiences a major recession, then:

the demand for loanable funds will shift right.

the supply of loanable funds will shift right.

the demand for loanable funds will shift left.

the supply of loanable funds will shift left.

both the supply and demand for loanable funds will increase.

____ 48. The measurement of personal savings may be distorted by:

increased college tuition costs.

reduced college tuition costs.

higher marginal tax rates.

greater levels of home equity.

lower levels of home equity.

____ 49. One could correctly argue that higher capital productivity:

would increase the value of capital and the supply of loanable funds.

would reduce the value of capital and the supply of loanable funds.

would only affect interest rates in the long run.

would increase the value of capital and the demand for loanable funds.

would reduce the value of capital and the demand for loanable funds.

____ 50. Firms expect more sales and profits in the near future; this would cause:

the demand for loanable funds to increase.

the supply of loanable funds to increase.

both the demand and supply of loanable funds to increase.

both the demand and supply of loanable funds to decrease.

lower interest rates in the near future.

____ 51. If everyone began feeling better about the economic future:

“animal spirits” would become negative.

“animal spirits” would become more positive and firms would invest more, causing the demand for loanable funds to increase.

“animal spirits” would become more positive and firms would invest more, causing the supply of loanable funds to increase.

“animal spirits” would become more positive and firms would invest more, causing the supply of loanable funds to decrease.

“animal spirits” would become more positive and firms would invest more, causing the demand for loanable funds to decrease.

____ 52. The demand for loanable funds increases while the supply of loanable funds remains constant. This would cause: