Question 1

If the nominal interest rate is 8 percent and the inflation rate is 3 percent, then the real interest rate is

Accepted Answer

A)  -5 percent.
B)  11 percent.
C)  5 percent.
D)  3 percent.E) A) and B)
F) A) and C)

Question 2

Which of the following is true concerning interest rates on bonds?

Accepted Answer

A)  Because of the tax advantage, municipal bonds pay higher interest rate than other bonds.High default risk makes the interest rate on a bond higher than otherwise.
B)  Because of the tax advantage, municipal bonds pay higher interest rate than other bonds.High default risk makes the interest rate on a bond lower than otherwise.
C)  Because of the tax advantage, municipal bonds pay lower interest rate than other bonds.High default risk makes the interest rate on a bond higher than otherwise.
D)  Because of the tax advantage, municipal bonds pay lower interest rate than other bonds.High default risk makes the interest rate on a bond lower than otherwise.E) B) and D)
F) A) and B)

Question 3

If the demand for loanable funds shifts to the left, then the equilibrium interest rate

Accepted Answer

A)  and quantity of loanable funds rises.
B)  rises and the quantity of loanable funds falls.
C)  falls and the quantity of loanable funds rises.
D)  and quantity of loanable funds falls.E) All of the above
F) C) and D)

Question 4

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Accepted Answer

A)  Saving and the interest rate
B)  Saving but not the interest rate
C)  The interest rate but not saving
D)  Neither saving nor the interest rateE) A) and B)
F) A) and C)

Question 5

Public saving is equal to national saving minus private saving.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds?

Accepted Answer

A)  The demand for loanable funds shifted to the right.
B)  The demand for loanable funds shifted to the left.
C)  The supply of loanable funds shifted to the right.
D)  The supply of loanable funds shifted to the left.E) A) and B)
F) A) and C)

Question 7

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

Accepted Answer

the intere...

Question 8

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Accepted Answer

A) True 
 B)False

Question 9

The slope of the supply of loanable funds curve represents the

Accepted Answer

A)  positive relation between the interest rate and investment.
B)  positive relation between the interest rate and saving.
C)  negative relation between the interest rate and investment.
D)  negative relation between the interest rate and saving.E) None of the above
F) A) and B)

Question 10

Banks and mutual funds are examples of financial markets.

Accepted Answer

A) True 
 B)False

Question 11

Public saving is the difference between _____ and _____.

Accepted Answer

tax revenue, governm...

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Figure 26-3
The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.
​ 1 to S2 is called A) an increase in the supply of loanable funds. B) an increase in the quantity of loanable funds supplied. C) a decrease in the supply of loanable funds. D) a decrease in the quantity of loanable funds supplied." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 26-3. A shift of the supply curve from S1 to S2 is called

Accepted Answer

A)  an increase in the supply of loanable funds.
B)  an increase in the quantity of loanable funds supplied.
C)  a decrease in the supply of loanable funds.
D)  a decrease in the quantity of loanable funds supplied.E) A) and B)
F) A) and C)

Question 14

What is a bond buyer promised when she buys a bond?

Accepted Answer

The answer of What is a bond buyer promised when...

Question 15

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 16

_____ and _____ are the two most important financial intermediaries.

Accepted Answer

Banks, Mut...

Question 17

Table 26-1. The following table presents information about a closed economy whose market for loanable funds is in equilibrium.
​
​
   GDP $8.3 trillion  Consumer Spending $5.1 trillion  Taxes Minus Transfers $1.9 trillion  Government Purchases $0.5 trillion \begin{array} { | l | l | } \hline 	ext { GDP } & \$ 8.3 	ext { trillion } \\hline 	ext { Consumer Spending } & \$ 5.1 	ext { trillion } \\hline 	ext { Taxes Minus Transfers } & \$ 1.9 	ext { trillion } \\hline 	ext { Government Purchases } & \$ 0.5 	ext { trillion } \\hline\end{array} GDP  Consumer Spending  Taxes Minus Transfers  Government Purchases ​$8.3 trillion $5.1 trillion $1.9 trillion $0.5 trillion ​​  ​
-Refer to Table 26-1. The quantity of private saving is

Accepted Answer

A)  $3.2 trillion.
B)  $1.3 trillion.
C)  $2.7 trillion.
D)  $6.4 trillion. E) A) and B)
F) None of the above

Question 18

Lenders sell bonds and borrowers buy them.

Accepted Answer

A) True 
 B)False

Question 19

The old adage, "Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Accepted Answer

A)  "Buy low-risk bonds."
B)  "Use a medium of exchange."
C)  "Diversify."
D)  "Intermediate."E) A) and B)
F) None of the above

Question 20

National saving is equal to Y - T - C.

Accepted Answer

A) True 
 B)False

Exam 26: Saving, Investment, and the Financial System

Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds?

Correct Answer
verified

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

Correct Answer
verified

Which of the following is true concerning interest rates on bonds?

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

The old adage, "Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Correct Answer
verified

If the nominal interest rate is 8 percent and the inflation rate is 3 percent, then the real interest rate is

Correct Answer
verified

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Correct Answer
verified

What is a bond buyer promised when she buys a bond?

Correct Answer
verified

The slope of the supply of loanable funds curve represents the

Correct Answer
verified

If the demand for loanable funds shifts to the left, then the equilibrium interest rate

Correct Answer
verified

Public saving is the difference between _ and _.

Correct Answer
verified
tax revenue, governm...
View Answer

National saving is equal to Y - T - C.

Correct Answer
verified

Banks and mutual funds are examples of financial markets.

Correct Answer
verified

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

Correct Answer
verified
the intere...
View Answer

Lenders sell bonds and borrowers buy them.

Correct Answer
verified

Public saving is equal to national saving minus private saving.

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 supply curve from S₁ to S₂ is called

Correct Answer
verified

_ and _ are the two most important financial intermediaries.

Correct Answer
verified
Banks, Mut...
View Answer

Correct Answer
verified

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Correct Answer
verified

Exam 26: Saving, Investment, and the Financial System

Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is true concerning interest rates on bonds?

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

The old adage, "Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8 percent and the inflation rate is 3 percent, then the real interest rate is

Correct AnswerverifiedShow Answer

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Correct AnswerverifiedShow Answer

What is a bond buyer promised when she buys a bond?

Correct AnswerverifiedShow Answer

The slope of the supply of loanable funds curve represents the

Correct AnswerverifiedShow Answer

If the demand for loanable funds shifts to the left, then the equilibrium interest rate

Correct AnswerverifiedShow Answer

Public saving is the difference between _____ and _____.

Correct Answerverifiedtax revenue, governm...View AnswerShow Answer

National saving is equal to Y - T - C.

Correct AnswerverifiedShow Answer

Banks and mutual funds are examples of financial markets.

Correct AnswerverifiedShow Answer

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

Correct Answerverifiedthe intere...View AnswerShow Answer

Lenders sell bonds and borrowers buy them.

Correct AnswerverifiedShow Answer

Public saving is equal to national saving minus private saving.

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 supply curve from S1 to S2 is called

Correct AnswerverifiedShow Answer

_____ and _____ are the two most important financial intermediaries.

Correct AnswerverifiedBanks, Mut...View AnswerShow Answer

Correct AnswerverifiedShow Answer

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Public saving is the difference between _ and _.

Correct Answer
verified
tax revenue, governm...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
the intere...
View Answer

Correct Answer
verified

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 supply curve from S₁ to S₂ is called

Correct Answer
verified

_ and _ are the two most important financial intermediaries.

Correct Answer
verified
Banks, Mut...
View Answer

Correct Answer
verified

Correct Answer
verified