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Chapter 13
Chapter 13
16. When interest rates rise, the quantity of loanable funds demanded by
a. firms decreases.
b. government decreases.
c. firms increases.
d. government increases.
18. If taxes are reduced with no change in government spending, and people spend
all the money from the tax cut on consumption
a. the demand for loanable funds will increase and the interest rate will increase.
b. the demand for loanable funds will increase and the interest rate will decrease.
c. the supply of loanable funds will decrease and the interest rate will increase.
d. neither the demand nor the supply of loanable funds will change.
19. If taxes are reduced with no change in government spending, and people save all
the money from the tax cut,
a. the demand for loanable funds will increase and the interest rate will increase.
b. the demand for loanable funds will increase and the interest rate will remain constant.
c. the supply of loanable funds will increase and the interest rate will decrease.
d. neither the demand nor the supply of loanable funds will change.
20. A(n) __________ allows a firm to decrease its tax liability by a fraction of the
investment it initiates during a particular period.
a. tax on corporate profits
b. tax on retained earnings
c. investment tax credit
d. personal income tax
21. If the U.S. government wants to increase the level of employment and real
output, it could
a. increase corporate income taxes.
b. provide an investment tax credit.
c. decrease expenditures on roads and dams.
d. increase the personal income tax.
22. Assuming the economy was in equilibrium, use the following information to
determine the government’s budget deficit or surplus.
Consumption Spending $3.5 trillion
Net Taxes $2.7 trillion
Household Saving $2.5 trillion
Investment Spending $2.2 trillion
The government’s deficit (surplus) was
a. $.3 trillion surplus.
b. $.2 trillion surplus.
c. $.3 trillion deficit.
d. $.5. trillion deficit.