Question 1

Which of the following numbers is not associated with shares of a company's stock?

Accepted Answer

A)   term
B)   dividend
C)   price
D)   price-earnings ratioE) A) and B)
F) A) and C)

Question 2

If consumers reduced their spending, what would happen to the interest rate and investment?

Accepted Answer

The interest rate wo...

Question 3

Which of the following would a macroeconomist consider as investment?

Accepted Answer

A)   Marisa purchases a bond issued by Proctor and Gamble Corp.
B)   Karlee purchases stock issued by Texas Instruments, Inc.
C)   Charlie builds a new coffee shop.
D)   All of the above are correct.E) All of the above
F) A) and C)

Question 4

Financial intermediaries are

Accepted Answer

A)   the same as financial markets.
B)   individuals who make profits by buying a stock low and selling it high.
C)   a more general name for financial assets such as stocks, bonds, and checking accounts.
D)   financial institutions through which savers can indirectly provide funds to borrowers.E) A) and B)
F) A) and C)

Question 5

When tax code changes reduce saving incentives, the interest rate will _____ and investment will _____.

Accepted Answer

The answer of When tax code changes reduce saving incentives,...

Question 6

Public saving is the difference between and .

Accepted Answer

tax revenue, governm...

Question 7

On which of these bonds is the prospect of default least likely?

Accepted Answer

A)   a junk bond
B)   a bond issued by the state of Arizona
C)   a bond issued by the federal government
D)   a bond issued by General Electric CorporationE) C) and D)
F) None of the above

Question 8

Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

Accepted Answer

A)   $2 trillion, $2 trillion
B)   $2 trillion, $3 trillion
C)   $3 trillion, $3 trillion
D)   $4 trillion, $2 trillionE) None of the above
F) C) and D)

Question 9

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

Accepted Answer

A)   $1.5 trillion and $2.5 trillion, respectively
B)   $2.5 trillion and $1.5 trillion, respectively
C)   $2.5 trillion and $2.5 trillion, respectively
D)   $1.5 trillion and $1.5 trillion, respectivelyE) A) and B)
F) C) and D)

Question 10

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

default ri...

Question 11

If a firm sells a total of 100 shares of stock, then

Accepted Answer

A)   each share represents 1 percent of the firm's indebtedness.
B)   each share represents ownership of 1 percent of the firm.
C)   the firm is engaging in term finance.
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 12

If there is a shortage of loanable funds, then

Accepted Answer

A)   the quantity demanded is greater than the quantity supplied and the interest rate will rise.
B)   the quantity demanded is greater than the quantity supplied and the interest rate will fall.
C)   the quantity supplied is greater than the quantity demanded and the interest rate will rise.
D)   the quantity supplied is greater than the quantity demanded and the interest rate will fall.E) C) and D)
F) A) and B)

Question 13

Which of the following events could explain an increase in interest rates together with a decrease in investment?

Accepted Answer

A)   The government budget went from surplus to deficit.
B)   The government instituted an investment tax credit.
C)   The government reduced the tax rate on savings.
D)   None of the above is correct.E) A) and B)
F) B) and D)

Question 14

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

Accepted Answer

bond, stoc...

Question 15

In a closed economy, what does (Y - T - C)  represent?

Accepted Answer

A)   national saving
B)   government tax revenue
C)   public saving
D)   private savingE) C) and D)
F) B) and D)

Question 16

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Accepted Answer

Robert is ...

Question 17

When tax code changes reduce investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment.

Accepted Answer

demand, le...

Question 18

Municipal bonds pay a relatively

Accepted Answer

A)   low rate of interest because of their high default risk and because the interest they pay is subject to federal income tax.
B)   low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.
C)   high rate of interest because of their high default risk and because federal taxes must be paid on the interest they pay.
D)   high rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.E) B) and C)
F) A) and D)

Question 19

Public saving is T - G, while private saving is Y - T - C.

Accepted Answer

A) True 
 B)False

Question 20

Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds?

Accepted Answer

A)   The interest rate and investment would fall.
B)   The interest rate and investment would rise.
C)   The interest rate would rise and investment would fall.
D)   None of the above is necessarily correct.E) A) and B)
F) A) and C)

Exam 26: Saving, Investment, and the Financial System

In a closed economy, what does (Y - T - C) represent?

Correct AnswerverifiedShow Answer

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

When tax code changes reduce saving incentives, the interest rate will _____ and investment will _____.

Correct AnswerverifiedShow Answer

If consumers reduced their spending, what would happen to the interest rate and investment?

Correct AnswerverifiedThe interest rate wo...View AnswerShow Answer

Financial intermediaries are

Correct AnswerverifiedShow Answer

Public saving is the difference between and .

Correct Answerverifiedtax revenue, governm...View AnswerShow Answer

Public saving is T - G, while private saving is Y - T - C.

Correct AnswerverifiedShow Answer

Municipal bonds pay a relatively

Correct AnswerverifiedShow Answer

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

Correct Answerverifiedbond, stoc...View AnswerShow Answer

When tax code changes reduce investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment.

Correct Answerverifieddemand, le...View AnswerShow Answer

Which of the following numbers is not associated with shares of a company's stock?

Correct AnswerverifiedShow Answer

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Correct AnswerverifiedRobert is ...View AnswerShow Answer

Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

Correct AnswerverifiedShow Answer

If there is a shortage of loanable funds, then

Correct AnswerverifiedShow Answer

Which of the following would a macroeconomist consider as investment?

Correct AnswerverifiedShow Answer

Which of the following events could explain an increase in interest rates together with a decrease in investment?

Correct AnswerverifiedShow Answer

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

Correct AnswerverifiedShow Answer

On which of these bonds is the prospect of default least likely?

Correct AnswerverifiedShow Answer

If a firm sells a total of 100 shares of stock, then

Correct AnswerverifiedShow Answer

Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds?

Correct AnswerverifiedShow Answer

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default ri...
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When tax code changes reduce saving incentives, the interest rate will _ and investment will _.

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The interest rate wo...
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tax revenue, governm...
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The two most important financial markets are the _ market and the _ market.

Correct Answer
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bond, stoc...
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When tax code changes reduce investment incentives, the ___ for loanable funds curve shifts to the _. This results in a(n) _ in the interest rate and a(n) ___ in investment.

Correct Answer
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demand, le...
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Robert is ...
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