Question 1

If consumers prefer earlier availability of goods to later availability, they are said to have a __________ rate of time preference.

Accepted Answer

A)  positive
B)  negative
C)  rational
D)  roundabout
E)  none of the aboveF) A) and B)
G) A) and C)

Question 2

As interest rates decrease, present values decrease and firms will purchase more capital goods.

Accepted Answer

A) True 
 B)False

Question 3

The supply curve for land will be upward sloping as long as

Accepted Answer

A)  there is unimproved land ready for development.
B)  the money price of land is greater than zero.
C)  land has alternative uses.
D)  the demand for land is variable.E) A) and C)
F) B) and C)

Question 4

What is the approximate present value of $8,000 received four years from today if the interest rate is 12 percent?

Accepted Answer

A)  $12,588
B)  $4,882
C)  $10,837
D)  $5,084
E)  $6,908F) None of the above
G) B) and E)

Question 5

Which of the following would increase the economic rent of a factor, the supply curve of which is perfectly inelastic?

Accepted Answer

A)  an increase in quantity demanded
B)  a decrease in quantity demanded
C)  an increase in demand
D)  a decrease in demand
E)  none of the aboveF) A) and C)
G) A) and B)

Question 6

Jim Smith made his fortune by buying and selling real estate. Which of the following theories on the source of profits best describes the reason behind his success?

Accepted Answer

A)  Uncertainty is a source of profits.
B)  Profit is the reward for alertness to arbitrage opportunities.
C)  Profit is the return to the entrepreneur as innovator.
D)  Land is always a source of economic rent and profit.
E)  If one works hard enough, one will be rewarded.F) A) and B)
G) B) and D)

Question 7

If the demand for consumption loans rises, this could be the result of

Accepted Answer

A)  the discovery of new roundabout methods of production.
B)  a higher rate of time preference in society.
C)  an increase in (people)  saving.
D)  a higher interest rate.
E)  a and cF) A) and D)
G) None of the above

Question 8

The present value of $2,000 one year in the future at a 6.5 percent interest rate is approximately

Accepted Answer

A)  $4,045
B)  $1,300.
C)  $2,130.
D)  $1,878.E) A) and D)
F) A) and C)

Question 9

An increase in the expected rate of inflation will shift the demand for loanable funds curve __________, while shifting the supply of loanable funds curve __________.

Accepted Answer

A)  rightward; rightward
B)  rightward; leftward
C)  leftward; rightward
D)  leftward; leftwardE) B) and D)
F) None of the above

Question 10

If medical research were to find that grain consumption lowers human life expectancy, agricultural land rents would

Accepted Answer

A)  increase.
B)  decrease.
C)  not be affected.
D)  increase in the short run and decrease in the long run.E) None of the above
F) A) and B)

Question 11

Exhibit 29-3
 
-Refer to Exhibit 29-3. The real interest rate in year 3 is

Accepted Answer

A)  5 percent.
B)  -5 percent.
C)  0 percent.
D)  -10 percent.
E)  10 percent.F) A) and E)
G) A) and C)

Question 12

Which of the following statements is true?

Accepted Answer

A)  The nominal interest rate is always higher than the real interest rate since the nominal interest rate equals the real interest rate plus the expected inflation rate.
B)  The nominal interest rate is always lower than the real interest rate since the nominal interest rate equals the real interest rate minus the expected inflation rate.
C)  The nominal interest rate can equal the real interest rate, but to do so the expected inflation rate must be zero percent.
D)  It is the nominal interest rate-not the real interest rate-that matters to borrowers.E) B) and C)
F) All of the above

Question 13

The terms interest and interest rate are synonyms.

Accepted Answer

A) True 
 B)False

Question 14

A change in the expected rate of inflation from 5 percent to 3 percent will

Accepted Answer

A)  decrease the real interest rate by 2 percentage points.
B)  decrease the real interest rate by 3 percentage points.
C)  increase the nominal interest rate by 2 percentage points.
D)  decrease the nominal interest rate by 2 percentage points.E) A) and B)
F) A) and C)

Question 15

Exhibit 29-3
 
-Refer to Exhibit 29-3. The real interest rate in year 2 is

Accepted Answer

A)  25 percent.
B)  5 percent.
C)  15 percent.
D)  -25 percent.
E)  -15 percent.F) C) and D)
G) B) and E)

Question 16

Which of the following statements is false?

Accepted Answer

A)  Capital depreciates over time.
B)  As the capital stock decreases, the marginal physical product of capital rises.
C)  If the return on capital is less than the price of credit, a firm will not borrow funds to invest in capital.
D)  If the return on capital is greater than the price of credit, then the price of credit must be greater than the price for loanable funds.E) A) and B)
F) B) and C)

Question 17

If the nominal interest rate is 8 percent and expected inflation rate is 9 percent, the real interest rate

Accepted Answer

A)  is 1 percent.
B)  is -1 percent.
C)  is 9 percent.
D)  cannot be calculated.
E)  none of the aboveF) A) and B)
G) A) and E)

Question 18

Describe how nineteenth-century economist David Ricardo viewed the relationship between rents and grain prices in England. How did his perspective differ from that of the prevailing view on this situation?

Accepted Answer

Ricardo contended that land rents were h...

Question 19

Bill Brown commands $2 million a year as either a professional basketball player or a professional baseball player. His next best alternative is a coaching job at a high school that pays $60,000 a year. If Bill chooses to play professional basketball, then his economic rent from working at that job rather than working as a professional baseball player is

Accepted Answer

A)  $0.
B)  $60,000.
C)  $1 million.
D)  $1,930,000.
E)  $2 million.F) C) and E)
G) C) and D)

Question 20

People such as Henry Ford and Thomas Edison most likely earned profit as a result of "innovative genius."

Accepted Answer

A) True 
 B)False

Exam 29: Interest Rent and Profit

People such as Henry Ford and Thomas Edison most likely earned profit as a result of "innovative genius."

Correct Answer
verified

As interest rates decrease, present values decrease and firms will purchase more capital goods.

Correct Answer
verified

Which of the following statements is false?

Correct Answer
verified

The supply curve for land will be upward sloping as long as

Correct Answer
verified

Correct Answer
verified

If the demand for consumption loans rises, this could be the result of

Correct Answer
verified

The terms interest and interest rate are synonyms.

Correct Answer
verified

An increase in the expected rate of inflation will shift the demand for loanable funds curve , while shifting the supply of loanable funds curve .

Correct Answer
verified

The present value of $2,000 one year in the future at a 6.5 percent interest rate is approximately

Correct Answer
verified

What is the approximate present value of $8,000 received four years from today if the interest rate is 12 percent?

Correct Answer
verified

Exhibit 29-3 -Refer to Exhibit 29-3. The real interest rate in year 3 is

Correct Answer
verified

Jim Smith made his fortune by buying and selling real estate. Which of the following theories on the source of profits best describes the reason behind his success?

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

If consumers prefer earlier availability of goods to later availability, they are said to have a __________ rate of time preference.

Correct Answer
verified

Describe how nineteenth-century economist David Ricardo viewed the relationship between rents and grain prices in England. How did his perspective differ from that of the prevailing view on this situation?

Correct Answer
verified
Ricardo contended that land rents were h...
View Answer

Exhibit 29-3 -Refer to Exhibit 29-3. The real interest rate in year 2 is

Correct Answer
verified

If the nominal interest rate is 8 percent and expected inflation rate is 9 percent, the real interest rate

Correct Answer
verified

Which of the following would increase the economic rent of a factor, the supply curve of which is perfectly inelastic?

Correct Answer
verified

A change in the expected rate of inflation from 5 percent to 3 percent will

Correct Answer
verified

If medical research were to find that grain consumption lowers human life expectancy, agricultural land rents would

Correct Answer
verified

Exam 29: Interest Rent and Profit

People such as Henry Ford and Thomas Edison most likely earned profit as a result of "innovative genius."

Correct AnswerverifiedShow Answer

As interest rates decrease, present values decrease and firms will purchase more capital goods.

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

The supply curve for land will be upward sloping as long as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the demand for consumption loans rises, this could be the result of

Correct AnswerverifiedShow Answer

The terms interest and interest rate are synonyms.

Correct AnswerverifiedShow Answer

An increase in the expected rate of inflation will shift the demand for loanable funds curve __________, while shifting the supply of loanable funds curve __________.

Correct AnswerverifiedShow Answer

The present value of $2,000 one year in the future at a 6.5 percent interest rate is approximately

Correct AnswerverifiedShow Answer

What is the approximate present value of $8,000 received four years from today if the interest rate is 12 percent?

Correct AnswerverifiedShow Answer

Exhibit 29-3 -Refer to Exhibit 29-3. The real interest rate in year 3 is

Correct AnswerverifiedShow Answer

Jim Smith made his fortune by buying and selling real estate. Which of the following theories on the source of profits best describes the reason behind his success?

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

If consumers prefer earlier availability of goods to later availability, they are said to have a __________ rate of time preference.

Correct AnswerverifiedShow Answer

Describe how nineteenth-century economist David Ricardo viewed the relationship between rents and grain prices in England. How did his perspective differ from that of the prevailing view on this situation?

Correct AnswerverifiedRicardo contended that land rents were h...View AnswerShow Answer

Exhibit 29-3 -Refer to Exhibit 29-3. The real interest rate in year 2 is

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8 percent and expected inflation rate is 9 percent, the real interest rate

Correct AnswerverifiedShow Answer

Which of the following would increase the economic rent of a factor, the supply curve of which is perfectly inelastic?

Correct AnswerverifiedShow Answer

A change in the expected rate of inflation from 5 percent to 3 percent will

Correct AnswerverifiedShow Answer

If medical research were to find that grain consumption lowers human life expectancy, agricultural land rents would

Correct AnswerverifiedShow Answer

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An increase in the expected rate of inflation will shift the demand for loanable funds curve , while shifting the supply of loanable funds curve .

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Ricardo contended that land rents were h...
View Answer

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verified

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Correct Answer
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Correct Answer
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