Part-1
Question 1
Draw a correctly labeled loanable funds graph that shows what happens to real interest rates for each of the subsequent situations:
a. The government begins providing health care subsidies for all Americans.
b. Private investors become less optimistic about the economy.
c. All overseas conflicts are ended and American troops return home.
Question 2
Which of the following is true when the government is deficit spending?
I. The government becomes a borrower in the loanable funds market.
II. Real interest rates rise.
III. Private investment spending is crowded out.
IV. The total amount of borrowing is decreased.
I and II only.
I and III only.
I, II and III only.
I, III and IV only.
I, II, III and IV.
Question 3
An increase in savings by Americans
a. would most likely increase the supply of loanable funds.
b. would most likely increase the interest rate.
c. would most likely decrease the demand for loanable funds.
d. would most likely decrease the supply of loanable funds.
e. would most likely decrease the quantity demanded of loanable funds.
Question 4
One of the reasons the demand curve for the loanable funds graph is down-sloping is that more investors are willing to supply funds
a. when interest rates are high.
b. when the interest rate is low, the quantity demanded of loanable funds will be less.
c. when the interest rate is low, the quantity demanded of loanable funds will be greater.
d. when the interest rate is high, the quantity supplied of loanable funds will be less.
e. when the interest rate is high, the quantity demanded of loanable funds will be greater.
Question 5
If investors sell their stocks and increase their money holdings due to a bad economy then demand for loanable funds will increase.
a. demand for loanable funds will decrease.
b. supply of loanable funds will increase.
c. supply of loanable funds will decrease.
d. quantity demanded of loanable funds will decrease.
Question 6
Given the loanable funds market illustrated above, which of the following is most likely to be true of quantity demanded and quantity supplied of loanable funds, if the government imposes an effective interest floor of 12%?
a. Quantity Demanded / Quantity Supplied
b. Decrease / Decrease
c. Decrease / Increase
d. Increase / No change
e. Increase / Decrease
f. Increase / Increase
Question 7
If interest rates are high, business investment spending decreases.
true
false
Question 8
If the supply of loanable funds increases, what will happen to real interest rates and the international value of the U.S. dollar (USD)?
a. Real Interest Rates / International Value of USD
b. Increase / Increase
c. Increase / Decrease
d. Decrease / No Change
e. Decrease / Decrease
f. Decrease / Increase
Question 9
If the demand for loanable funds increases, what will happen to real interest rates and the international value of the U.S. dollar (USD)?
a.Real Interest Rates / International Value of USD
b. Increase / Increase
c. Increase / Decrease
d. Decrease / No Change
e. Decrease / Decrease
f. Decrease / Increase
Question 10
Given the loanable funds market illustrated above, which of the following is most likely to be true of quantity demanded and quantity supplied of loanable funds if the government imposes an effective interest ceiling of 6%?
a. Quantity Demanded / Quantity Supplied
b. Decrease / Decrease
c. Decrease / Increase
d. Increase / No change
e. Increase / Decrease
f. Increase / Increase
Question 11
A business will borrow money to complete a project when
a.the interest rate is greater than the rate of return on the project.
b.the interest rate is less than the rate of return on the project.
c. the interest paid is more than the cost of the project.
d. the interest rate is less than the cost of the project.
e. the interest rate is variable over the course of the project.
Part-2
Determine short-run aggregate supply
Question 1
For the question below, write an explanation of the short-run effect (including the determinant of AD or AS that is causing the shift, the line that shifts (AD or AS), the direction of the shift (left or right), and the impact on output and price level (increase or decrease) and submit a properly drawn and labeled aggregate demand and aggregate supply graph for the scenario. Make sure your name and assignment number are written on each page of graphs you submit. All text must be written in the text box provided.
The election of a new Congress causes consumer confidence to soar as expectations of future economic growth are solid.
Question 2
For the question below, write an explanation of the short-run effect including the determinant of AD or AS that is causing the shift, the line that shifts (AD or AS), the direction of the shift (left or right), and the impact on output and price level (increase or decrease) and submit a properly drawn and labeled aggregate demand and aggregate supply graph for the scenario. Make sure your name and assignment number are written on each page of graphs you submit. All text must be written in the text box provided.
Tourists flock to visit the major theme park's in Orlando, Florida.
Question 3
For the question below, write an explanation of the short-run effect (including the determinant of AD or AS that is causing the shift, the line that shifts (AD or AS), the direction of the shift (left or right), and the impact on output and price level (increase or decrease) and submit a properly drawn and labeled aggregate demand and aggregate supply graph for the scenario. Make sure your name and assignment number are written on each page of graphs you submit. All text must be written in the text box provided.
Assume that over the next ten years, the level of educational attainment in the US increases significantly.
Question 4
For the question below, write an explanation of the short-run effect (including the determinant of AD or AS that is causing the shift, the line that shifts (AD or AS), the direction of the shift (left or right), and the impact on output and price level (increase or decrease) and submit a properly drawn and labeled aggregate demand and aggregate supply graph for the scenario. Make sure your name and assignment number are written on each page of graphs you submit. All text must be written in the text box provided.
The price of a barrel of oil, a resource used by manufacturers, skyrockets amid wild speculation on Wall Street.
Question 5
If the government provides an energy subsidy for all farmers in the Macro Islands, then
SRAS will shift right.
SRAS will shift right and AD will shift right.
AD will shift right.
SRAS will shift left and AD will shift right.
SRAS will shift left and AD will shift left.
Question 6
If imports to the United States increased, what would most likely happen to price level and real gross domestic product?
Price Level / Real GDP
Increase / Increase
Increase / Decrease
Indeterminate / Increase
Decrease / Decrease
Decrease / Increase
Question 7
If workers are more educated, then short-run aggregate supply will
increase and output and price level will increase as well.
decrease and output and price level will decrease as well.
increase and output will increase but price level will decrease.
increase and output will decrease but price level will increase.
decrease and output will decrease but price level will increase.
Question 8
When investment spending increases in the vertical range of SRAS, then the price level will
increase and output will decrease.
decrease and output will increase.
increase and output will increase.
decrease and output will decrease.
increase and output will remain virtually the same.
Question 9
At P1Y1, if taxes decrease then consumer spending will
decrease and AD will shift right to long-run equilibrium.
decrease and AD will shift left to long-run equilibrium.
increase and AD will shift right to long-run equilibrium.
increase and AD will shift left to long-run equilibrium.
cannot be determine with information given.
Question 10
If producer confidence in the economy increases, economists would say that this is a
positive demand shock that shifts AD to the left.
positive demand shock that shifts SRAS to the left.
positive demand shock that shifts AD to the right.
positive supply shock that shifts AD to the right.
positive supply shock that shifts SRAS to the left.