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Complete the following equation:

Approximately, the real interest rate ________ the inflation rate ________ the nominal interest rate.

times; divided by 100 equals

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Short Description: A line graph of real interest rate versus loanable funds. Long Description: The vertical axis is labelled, real interest rate (percent per year) and ranges from 0 to 10 in increments of 2. The horizontal axis is labelled, loanable funds (billions of 20 12 dollars) and ranges from 0 to 900 in increments of 150. The line for D L F slopes downward from the upper left corner to the lower right corner passing through the points (150, 10), (300, 8), (450, 6), (600, 4), and (750, 2).

Refer to Figure 7.2.3, which shows the demand for loanable funds curve. If the real interest rate is 6 percent, what happens to the quantity of loanable funds demanded when expected profit decreases?

The new quantity of loanable funds demanded

remains at $450 billion.

decreases to zero.

decreases to less than $450 billion.

increases to between $450 billion and $600 billion.

increases to $600 billion.

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In 2024, Tim's Gyms finances the building of a new gym with a loan from its bank. If Tim's Gym fails to make payments, the bank receives ownership of the gym. What is the source of the funds Tim's Gyms used?

a bond issued in the bond market

a stock issued in the bond market

a stock issued in the loan market

a mortgage obtained in the stock market

a mortgage obtained in the loan market

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In the market for loanable funds, if the interest rate is above the market equilibrium interest rate, which of the following events occurs?

Government saving increases.

Expected future income increases.

A surplus of loanable funds exists.

Expected profit falls.

A shortage of loanable funds exists.

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If the real interest rate is below the market equilibrium real interest rate, what change occurs in the market?

A surplus of loanable funds exists in the market.

Lenders can't find borrowers for all the available funds, so the real interest rate falls.

Borrowers find it easy to get the funds they want, so the real interest rate falls.

Borrowers can't borrow all the funds they want, so the real interest rate rises.

Lenders can't find borrowers for all the available funds, so the real interest rate rises.

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What determines national saving?

private saving + private wealth

private saving - net taxes

government saving

private saving + government saving

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Real interest rate (percent per year)	Loanable funds demanded (trillions of 2012 dollars)	Loanable funds supplied (trillions of 2012 dollars)
4	6.5	4.5
5	6.0	5.0
6	5.5	5.5
7	5.0	6.0
8	4.5	6.5
9	4.0	7.0
10	3.5	7.5

Refer to Table 7.2.1, which gives data about a loanable funds market. What is the equilibrium quantity of saving?

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What is the Ricardo-Barro effect?

A government budget deficit induces a decrease in saving that magnifies the crowding-out effect.

A government budget deficit has no effect on the real interest rate.

A government budget deficit increases the real interest rate.

A government balanced budget has no effect on real GDP.

A government budget deficit crowds out private investment.

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Which of the following statements is the crowding-out effect?

Private saving crowding out government saving.

A government deficit crowding out investment.

Private saving crowding out net taxes.

Government spending crowding out private spending.

Private investment crowding out government saving.

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When the Bank of Canada conducts an open market purchase, which of the following events occurs?

The monetary base decreases.

The quantity of Bank of Canada notes increases.

Bank reserves decrease.

Interest rates rise.

The monetary base increases.

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