Question 1

Which of the following both make the interest rate on a bond higher than otherwise?

Accepted Answer

A)   the interest it pays is taxed and it was issued by a financially strong corporation
B)   the interest it pays is taxed and it was issued by a financially weak corporation
C)   the interest it pays is tax exempt and it was issued by a financially strong corporation
D)   the interest it pays is tax exempt and it was issued by a financially weak corporationE) All of the above
F) C) and D)

Question 2

Suppose a small closed economy has GDP of $5 billion, consumption of $3 billion, and government expenditures of $1 billion. Then investment and national saving are both $1 billion.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following restrictions implies that saving and investment are equal for a closed economy?

Accepted Answer

A)   Private saving is equal to zero.
B)   Public saving is equal to zero.
C)   The economy's government is running neither a surplus nor a deficit.
D)   No restriction is necessary; saving and investment are equal for all closed economies.E) A) and B)
F) C) and D)

Question 4

Use the following table to answer the following questions.
Table 26-2
 
-Refer to Table 26-2. Which company had the highest dollar dividend per share?

Accepted Answer

A)   Boeing Co.
B)   Eli Lilly and Co.
C)   Kraft Foods Group
D)   Kellogg Co.E) A) and B)
F) B) and D)

Question 5

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

Accepted Answer

A)   supply of existing shares of the stock and the price will both rise.
B)   supply of existing shares of the stock and the price will both fall.
C)   demand for existing shares of the stock and the price will both rise.
D)   demand for existing shares of the stock and the price will both fall.E) A) and B)
F) None of the above

Question 6

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

Accepted Answer

A)   an increase in the demand for loanable funds, and that increase would originate from people who had some extra income they wanted to lend.
B)   an increase in the demand for loanable funds, and that increase would originate from households and firms who wish to borrow to make investments.
C)   a decrease in the demand for loanable funds, and that decrease would originate from people who had some extra income they wanted to lend.
D)   a decrease in the demand for loanable funds, and that decrease would originate from households and firms who wish to borrow to make investments.E) B) and D)
F) B) and C)

Question 7

In a closed economy, what does T - G)  represent?

Accepted Answer

A)   national saving
B)   investment
C)   private saving
D)   public savingE) A) and C)
F) None of the above

Question 8

When a country saves a larger portion of its GDP than it did before, it will have

Accepted Answer

A)   more capital and higher productivity.
B)   more capital and lower productivity.
C)   less capital and higher productivity.
D)   less capital and lower productivity.E) C) and D)
F) A) and B)

Question 9

Which of the following bond buyers did not buy the bond that best met his or her objective?

Accepted Answer

A)   Jackie wanted a bond with a high interest rate and was willing to take a lot of risk. She purchased a junk bond.
B)   Andrew wanted a bond that would allow him to legally avoid paying federal income taxes. He purchased a municipal bond.
C)   Suzy wanted to purchase a bond whose seller was unlikely to default. She purchased a bond that Standards and Poor's rated a low credit risk.
D)   Cecilia held long-term bonds rather than short-term bonds to avoid risk.E) B) and D)
F) B) and C)

Question 10

In which case would people desire to borrow the most?

Accepted Answer

A)   the nominal interest rate is 8% and the inflation rate is 7%
B)   the nominal interest rate is 7% and the inflation rate is 5%
C)   the nominal interest rate is 6% and the inflation rate is 3%
D)   the nominal interest rate is 5% and the inflation rate is 1%E) None of the above
F) All of the above

Question 11

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

Accepted Answer

A) True 
 B)False

Question 12

National saving is the sum of and . In a closed economy it is equal to in equilibrium.

Accepted Answer

private saving, publ...

Question 13

The country of Yokovia does not trade with any other country. Its GDP is $20 billion. Its government collects $2 billion in taxes. Consumption equals $15 billion and investment equals $2 billion. What is public saving in Yokovia, and what is the value of the goods and services purchased by the government of Yokovia?

Accepted Answer

A)   -$2 billion and $1 billion.
B)   $1 billion and $1 billion.
C)   -$1 billion and $3 billion.
D)   -$2 billion and $3 billion.E) C) and D)
F) None of the above

Question 14

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would

Accepted Answer

A)   raise both private and public saving.
B)   raise private saving and lower public saving.
C)   lower private saving and raise public saving.
D)   lower private and public saving.E) A) and B)
F) A) and C)

Question 15

When tax code changes increase investment incentives, the _____ for loanable funds curve shifts to the _____. This results in an) _____ in the interest rate and an) _____ in investment.

Accepted Answer

demand, ri...

Question 16

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Accepted Answer

Investment spending ...

Question 17

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct?

Accepted Answer

A)   Melinda is an investor.
B)   The depositors are investors.
C)   Both Melinda and the depositors are investors.
D)   Neither Melinda nor the depositors are investors.E) B) and C)
F) A) and B)

Question 18

The two most important financial markets are the _____ market and the _____ market.

Accepted Answer

bond, stoc...

Question 19

All or part of a firm's profits may be paid out to the firm's stockholders in the form of

Accepted Answer

A)   retained earnings.
B)   dividends.
C)   interest payments.
D)   capital accounts.E) All of the above
F) B) and D)

Question 20

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Accepted Answer

A)   interest rates and the equilibrium quantity of loanable funds rise.
B)   interest rates rise and the equilibrium quantity of loanable funds fall.
C)   interest rates fall and the equilibrium quantity of loanable funds rise.
D)   interest rates and the equilibrium quantity of loanable funds fall.E) All of the above
F) None of the above

Exam 13: Saving, Investment, and the Financial System

In which case would people desire to borrow the most?

Correct Answer
verified

National saving is the sum of and . In a closed economy it is equal to in equilibrium.

Correct Answer
verified
private saving, publ...
View Answer

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct?

Correct Answer
verified

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would

Correct Answer
verified

The two most important financial markets are the _ market and the _ market.

Correct Answer
verified
bond, stoc...
View Answer

In a closed economy, what does T - G) represent?

Correct Answer
verified

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

Correct Answer
verified

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Correct Answer
verified

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. Which company had the highest dollar dividend per share?

Correct Answer
verified

Which of the following both make the interest rate on a bond higher than otherwise?

Correct Answer
verified

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

Correct Answer
verified

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

Correct Answer
verified

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Correct Answer
verified
Investment spending ...
View Answer

All or part of a firm's profits may be paid out to the firm's stockholders in the form of

Correct Answer
verified

Which of the following restrictions implies that saving and investment are equal for a closed economy?

Correct Answer
verified

Suppose a small closed economy has GDP of $5 billion, consumption of $3 billion, and government expenditures of $1 billion. Then investment and national saving are both $1 billion.

Correct Answer
verified

When a country saves a larger portion of its GDP than it did before, it will have

Correct Answer
verified

When tax code changes increase investment incentives, the ___ for loanable funds curve shifts to the _. This results in an) _ in the interest rate and an) ___ in investment.

Correct Answer
verified
demand, ri...
View Answer

Which of the following bond buyers did not buy the bond that best met his or her objective?

Correct Answer
verified

Correct Answer
verified

Exam 13: Saving, Investment, and the Financial System

In which case would people desire to borrow the most?

Correct AnswerverifiedShow Answer

National saving is the sum of and . In a closed economy it is equal to in equilibrium.

Correct Answerverifiedprivate saving, publ...View AnswerShow Answer

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct?

Correct AnswerverifiedShow Answer

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would

Correct AnswerverifiedShow Answer

The two most important financial markets are the _____ market and the _____ market.

Correct Answerverifiedbond, stoc...View AnswerShow Answer

In a closed economy, what does T - G) represent?

Correct AnswerverifiedShow Answer

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

Correct AnswerverifiedShow Answer

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Correct AnswerverifiedShow Answer

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. Which company had the highest dollar dividend per share?

Correct AnswerverifiedShow Answer

Which of the following both make the interest rate on a bond higher than otherwise?

Correct AnswerverifiedShow Answer

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

Correct AnswerverifiedShow Answer

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

Correct AnswerverifiedShow Answer

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Correct AnswerverifiedInvestment spending ...View AnswerShow Answer

All or part of a firm's profits may be paid out to the firm's stockholders in the form of

Correct AnswerverifiedShow Answer

Which of the following restrictions implies that saving and investment are equal for a closed economy?

Correct AnswerverifiedShow Answer

Suppose a small closed economy has GDP of $5 billion, consumption of $3 billion, and government expenditures of $1 billion. Then investment and national saving are both $1 billion.

Correct AnswerverifiedShow Answer

When a country saves a larger portion of its GDP than it did before, it will have

Correct AnswerverifiedShow Answer

When tax code changes increase investment incentives, the _____ for loanable funds curve shifts to the _____. This results in an) _____ in the interest rate and an) _____ in investment.

Correct Answerverifieddemand, ri...View AnswerShow Answer

Which of the following bond buyers did not buy the bond that best met his or her objective?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
private saving, publ...
View Answer

Correct Answer
verified

Correct Answer
verified

The two most important financial markets are the _ market and the _ market.

Correct Answer
verified
bond, stoc...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
Investment spending ...
View Answer

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

When tax code changes increase investment incentives, the ___ for loanable funds curve shifts to the _. This results in an) _ in the interest rate and an) ___ in investment.

Correct Answer
verified
demand, ri...
View Answer

Correct Answer
verified

Correct Answer
verified