Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Economics 202 Ch 26
Principles of Economics ch 26
| Question | Answer |
|---|---|
| Interest | The payment for the use of loanable funds. |
| The supply of loanable funds comes from: | Households that save (do not consume) part of their income. |
| Household saving is motivated by: | The desire to accumulate wealth for retirement, major future expenditures, or the desire to earn interest on savings. |
| The private demand for loanable funds comes from: | Consumers, who have a positive rate of time preference and business firms that wish to invest in physical capital. |
| Positive Rate of Time Preference | Consumers prefer earlier consumption to later consumption. This causes people to be willing to borrow (and pay interest) in order to consume now rather than later. |
| Investing in physical capital can: | Increase a business firm's productivity, which adds to a firm's profits by increasing the firm's revenue or by decreasing the firm's production costs. |
| An increase in expected rates of return would increase investment demand and: | Shift the loanable funds demand curve to the right. |
| A decrease in expected rates of return would decrease investment demand and: | Would result in a new equilibrium at a lower interest rate and a lesser quantity of saving and borrowing. |
| Interest rates vary depending on: | Risk, term of loan, and relative cost of making the loan. |
| Real Interest Rate | Nominal interest rate minus the rate of inflation. (The rate of interest that reflects the true cost of borrowing and the true gain from lending.) |
| An asset is valuable because: | We expect a future benefit from the asset. |
| Current consumption is more valuable than future consumption and earlier consumption is more valuable than later consumption, because: | Consumers have a positive rate of time preference and interest. |
| Present Value of an Asset (PV) | The discounted value today of the income stream associated with the asset. |
| PV = | [F / (1 + i)^n] (F is the future amount, i is the interest rate that we believe we could earn if we had the future amount today, and n is the number of years we have to wait to receive the future amount.) |
| Economic Rent | Payment to a factor in excess of opportunity costs. |
| There is often a connection between the payment to a factor and: | The price of what the factor produces. |
| Economic rent performs what two functions? | It allocates resources to their most valuable use and it provides incentive for resource owners to develop the productivity of their resources. |
| What are the sources of economic profit? | Arbitrage, uncertainty, innovation, and monopoly profits. |
| Arbitrage | Refers to buying at a low price in one market and selling at a higher price in another market. |
| Choice Architecture | The context in which people make decisions. |
Created by:
dengler
Popular Business sets