Tackle the Test: Multiple-Choice Questions

1. Question

   A business will decide whether or not to borrow money to finance a project based on a comparison of the interest rate with the ____ from its project.

   A.

   expected revenue

   B.

   profit

   C.

   rate of return

   D.

   cost generated

   E.

   demand generated

   A business will decide whether or not to borrow money to finance a project based on a comparison of the interest rate with the ____ from its project.

2. Question

   The real interest rate equals the

   A.

   nominal interest rate plus the inflation rate.

   B.

   nominal interest rate minus the inflation rate.

   C.

   nominal interest rate divided by the inflation rate.

   D.

   nominal interest rate times the inflation rate.

   E.

   federal funds rate.

   The real interest rate equals the

3. Question

   Which of the following will increase the demand for loanable funds?

   A.

   a federal government budget surplus

   B.

   an increase in perceived business opportunities

   C.

   a decrease in the interest rate

   D.

   positive capital inflows

   E.

   decreased private saving rates

   Which of the following will increase the demand for loanable funds?

4. Question

   Which of the following will increase the supply of loanable funds?

   A.

   an increase in perceived business opportunities

   B.

   decreased government borrowing

   C.

   an increased private saving rate

   D.

   an increase in the expected inflation rate

   E.

   a decrease in capital inflows

   Which of the following will increase the supply of loanable funds?

5. Question

   Both lenders and borrowers base their decisions on

   A.

   expected real interest rates.

   B.

   expected nominal interest rates.

   C.

   real interest rates.

   D.

   nominal interest rates.

   E.

   nominal interest rates minus real interest rates.

   Both lenders and borrowers base their decisions on