Question 1

Compared to short-term bonds, other things the same, long-term bonds generally have

Accepted Answer

A)   more risk and so they pay higher interest rates.
B)   less risk and so they pay lower interest rates.
C)   less risk and so they pay higher interest rates.
D)   about the same risk and so they pay about the same interest rate.E) A) and C)
F) A) and B)

Question 2

A restaurant chain announces declining revenues. What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

Accepted Answer

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Question 3

When the government runs a budget deficit,

Accepted Answer

A)   interest rates are lower than they would be if the budget were balanced.
B)   national saving is higher than it would be if the budget were balanced.
C)   investment is lower than it would be if the budget were balanced.
D)   All of the above are correct.E) C) and D)
F) A) and B)

Question 4

Scenario 26-3. Assume the following information for an imaginary, open economy.
Consumption = $1,000; investment = $200; net exports = -$50; taxes = $230; private saving = $225; and national saving = $150.
-Refer to Scenario 26-3. For this economy, government purchases amount to

Accepted Answer

A)   $330.
B)   $280.
C)   $305.
D)   $310.E) B) and C)
F) C) and D)

Question 5

Which of the following are financial intermediaries?

Accepted Answer

A)   both banks and mutual funds
B)   banks but not mutual funds
C)   mutual funds but not banks
D)   neither banks or mutual fundsE) A) and C)
F) None of the above

Question 6

The country of Bienmundo does not trade with any other country. Its GDP is $30 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Bienmundo amounts to $5 billion. What are consumption and investment in Bienmundo?

Accepted Answer

A)   $17 billion and $8 billion, respectively.
B)   $19 billion and $6 billion, respectively.
C)   $19 billion and $8 billion, respectively.
D)   $17 billion and $6 billion, respectively.E) A) and C)
F) C) and D)

Question 7

A policy that induces people to save more shifts

Accepted Answer

A)   the supply of loanable funds rightward and increases investment.
B)   the supply of loanable funds leftward and decreases investment.
C)   the supply of loanable funds rightward and decreases investment.
D)   the supply of loanable funds leftward and increases investment.E) C) and D)
F) A) and B)

Question 8

Which of the following equations represents GDP for an open economy?

Accepted Answer

A)   Y = C + I + G + NX
B)   NX = I - G
C)   I = Y - C + G + NX
D)   Y = C + I + GE) A) and D)
F) C) and D)

Question 9

The bond market

Accepted Answer

A)   is a financial market, whereas the stock market is a financial intermediary.
B)   is a financial intermediary, whereas the stock market is a financial market.
C)   is a financial market, as is the stock market.
D)   is a financial intermediary, as is the stock market.E) None of the above
F) A) and B)

Question 10

When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures

Accepted Answer

A)   capital investment.
B)   investment in human capital.
C)   business consumption expenditures.
D)   personal saving.E) C) and D)
F) A) and B)

Question 11

Banks

Accepted Answer

A)   play a role in creating an asset that people can use as a medium of exchange.
B)   are financial intermediaries, but mutual funds are not financial intermediaries.
C)   are financial markets, as are bond markets.
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 12

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000. Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently,

Accepted Answer

A)   the market for loanable funds is in equilibrium.
B)   the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise.
C)   the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall.
D)   the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise.E) B) and C)
F) A) and B)

Question 13

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Accepted Answer

A)   Private saving is equal to government expenditures.
B)   Public saving is equal to investment.
C)   After paying their taxes and paying for their consumption, households have nothing left.
D)   The government's tax revenue is equal to its expenditures.E) B) and C)
F) A) and D)

Question 14

Which of the following is not always correct for a closed economy?

Accepted Answer

A)   National saving equals private saving plus public saving.
B)   Net exports equal zero.
C)   Real GDP measures both income and expenditures.
D)   Private saving equals investment.E) A) and C)
F) C) and D)

Question 15

When the government increases spending holding taxes constant), the budget balance _____. This causes the interest rate in the market for loanable funds to _____ and investment to _____.

Accepted Answer

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Question 16

XDF Corporation had a P/E ratio of 25, earnings per share of $4, and retained earnings per share of $3. What was its dividend yield?

Accepted Answer

A)   4%
B)   3%
C)   1%
D)   None of the above is correct.E) None of the above
F) B) and C)

Question 17

Which of the following is not correct?

Accepted Answer

A)   American families save a larger fraction of their incomes than their counterparts in many other countries such as Germany and Japan.
B)   Saving is an important long-run determinant of a nation's standard of living.
C)   A change in tax laws that encouraged greater saving would lower interest rates.
D)   Taxes on interest income can substantially decrease the future value of current saving.E) C) and D)
F) All of the above

Question 18

If there is a surplus of loanable funds, then

Accepted Answer

A)   the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium.
B)   the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium.
C)   the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium.
D)   the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.E) A) and B)
F) All of the above

Question 19

Which of the following statements is correct?

Accepted Answer

A)   A corporation receives a monetary payment every time its shares of stock are traded by stockholders on organized stock exchanges.
B)   When a corporation sells bonds as a means of raising funds it is engaging in debt finance.
C)   A share of stock is an IOU.
D)   The two most important financial markets in the economy are the stock market and financial intermediaries.E) All of the above
F) B) and C)

Question 20

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. 
-Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Accepted Answer

A)   The government goes from running a budget deficit to running a budget surplus.
B)   Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories.
C)   A change in the tax laws encourages people to consume less and save more.
D)   A change in the tax laws encourages people to consume more and save less.E) A) and D)
F) C) and D)

Exam 13: Saving, Investment, and the Financial System

Scenario 26-3. Assume the following information for an imaginary, open economy. Consumption = $1,000; investment = $200; net exports = -$50; taxes = $230; private saving = $225; and national saving = $150. -Refer to Scenario 26-3. For this economy, government purchases amount to

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Which of the following are financial intermediaries?

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When the government runs a budget deficit,

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Which of the following statements is correct?

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A restaurant chain announces declining revenues. What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

Correct Answerverifieddefault ri...View AnswerShow Answer

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

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XDF Corporation had a P/E ratio of 25, earnings per share of $4, and retained earnings per share of $3. What was its dividend yield?

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When the government increases spending holding taxes constant), the budget balance _____. This causes the interest rate in the market for loanable funds to _____ and investment to _____.

Correct Answerverifiedfalls, inc...View AnswerShow Answer

A policy that induces people to save more shifts

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Which of the following is not always correct for a closed economy?

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If there is a surplus of loanable funds, then

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The bond market

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When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures

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The country of Bienmundo does not trade with any other country. Its GDP is $30 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Bienmundo amounts to $5 billion. What are consumption and investment in Bienmundo?

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Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. -Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

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Compared to short-term bonds, other things the same, long-term bonds generally have

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For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000. Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently,

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Banks

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Which of the following equations represents GDP for an open economy?

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Which of the following is not correct?

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When the government increases spending holding taxes constant), the budget balance ___. This causes the interest rate in the market for loanable funds to _ and investment to ___.

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