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WorksheetsLoanable Funds Market
Total questions: 24
Worksheet time: 14mins
Name
Class
Date
1.
An increase in government spending only leads to an increase in the Demand for Loanable Funds when
a)
the spending is on infrastructure.
b)
the spending is on education.
c)
the spending is deficit spending.
d)
the spending leads to a surplus.
2.
The shift in the graph could be caused by
a)
government deficit spending.
b)
the crowding out effect.
c)
an increase in wealth.
d)
an increase in personal savings.
3.
The shift in the graph could be caused by
a)
an increase in consumer wealth.
b)
expectations of a recession.
c)
a government surplus.
d)
the balanced budget multiplier.
4.
The shift in the graph could be caused by
a)
a government budget deficit.
b)
a government budget surplus.
c)
an increase in consumer wealth.
d)
a new technological innovation.
5.
The shift in the graph could be caused by
a)
the economy contracting.
b)
a decline in population.
c)
a new technology revolutionizes business.
d)
the government eliminates default risk.
6.
The shift in the graph could be caused by
a)
the crowding out effect.
b)
new technology.
c)
the government guarantees home loans.
d)
the market is expected to boom.
7.
The shift in the graph could be caused by
a)
an increase in consumer wealth.
b)
an increase in deficit spending.
c)
the Fed buys securities.
d)
the population grows.
8.
The shift in the graph could be caused by
a)
increasing the discount rate.
b)
decreasing taxes.
c)
decreasing the Federal Funds rate.
d)
lowering the reserve requirement.
9.
If investors expect the economy is headed for expansion the ______ of loanable funds will _______.
a)
demand; decrease
b)
demand; increase
c)
supply; decrease
d)
supply; increase
10.
When entities like Fannie Mae and Freddie Mac guarantee a loan they are eliminating _____ for investors.
a)
default risk
b)
irrational exuberance
c)
wealth effect
d)
technological change
11.
If the stock market sees increases in all sectors the _____ of loanable funds will _____ because of the _____ effect.
a)
supply: decrease; population growth
b)
demand; fall; crowding out
c)
supply; decrease; wealth
d)
demand; decrease; default risk
12.
The crowding out effect can only occur if the
a)
government deficit spends.
b)
government runs a surplus.
c)
personal savings rate increases.
d)
economy begins to boom.
13.
The crowding out effect manifests itself in the GDP formula by causing
a)
an increase in G and a decrease in Xn.
b)
a decrease in G and an increase in C.
c)
an increase in I and a decrease in G.
d)
an increase in G but a decrease in I.
14.
Irrational exuberance about the future of the economy would lead to
a)
an increase in DLF
b)
a decrease in DLF
c)
an increase in SLF
d)
a decrease in SLF
15.
A major technological break through would lead to
a)
an increase in DLF
b)
a decrease in DLF
c)
an increase in SLF
d)
a decrease in SLF
16.
A recession would lead to
a)
an increase in DLF
b)
a decrease in DLF
c)
an increase in SLF
d)
a decrease in SLF
17.
An increase in disposable income would lead to
a)
an increase in the DLF
b)
a decrease in the DLF
c)
an increase in the SLF
d)
a decrease in the SLF
18.
If a large segment of the population expects their income to fall in the future
a)
an increase in DLF
b)
a decrease in DLF
c)
an increase in SLF
d)
a decrease in SLF
19.
If the Fed raises the reserve requirement we can expect
a)
an increase in DLF
b)
a decrease in DLF
c)
an increase in SLF
d)
a decrease in SLF
20.
The selling of securities will lead to
a)
an increase in DLF
b)
a decrease in DLF
c)
an increase in SLF
d)
a decrease in SLF
21.
What is measured on the Y axis of the Loanable funds market?
a)
real interest rate
b)
nominal interest nominal interest rate
c)
quantity of loanable funds
d)
quantity of money
22.
Assume that businesses feel pessimistic about the future and therefore do not want to buy as much real capital (machines to help production) as before. To buy machines, businesses borrow money from banks. Because they don't want the machines, they do not want to borrow as much money as before. How would this affect the loanable funds market?
a)
demand for loanable funds increases
b)
demand for loanable funds decreases
c)
there is no change to demand for loanable funds
23.
Assume households increase their savings (and always assume households put most of their savings in banks). As a result, banks within the country's banking system have more funds from which they can make loans. Thus, how would this increase in household savings affect the loanable funds market?
a)
supply of loanable funds increases
b)
supply of loanable funds decreases
c)
supply of loanable funds does not change
24.
_____________ occurs when a government deficit drives up the interest rate and leads to reduced investment spending.
a)
Crowding Out
b)
Rate of Return
c)
Loanable Funds Market
d)
Fisher Effect
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