Question 1

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Accepted Answer

The interest rate is below its...

Question 2

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) B) and C)
F) None of the above

Question 3

Other things the same, the effects of an increase in transfer payments on the government's budget deficit will lead to

Accepted Answer

A)   greater investment.
B)   a higher interest rate.
C)   higher public saving.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 4

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

Accepted Answer

private saving, publ...

Question 5

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 6

A mutual fund

Accepted Answer

A)   is a financial institution that stands between savers and borrowers.
B)   is a financial intermediary.
C)   allows people with small amounts of money to diversify their holdings.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 7

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

Accepted Answer

A)   Private and public saving are both positive.
B)   Private saving is positive; public saving is negative.
C)   Private saving is negative; public saving is positive.
D)   Both private saving and public saving are negative.E) A) and D)
F) All of the above

Question 8

A budget deficit

Accepted Answer

A)   changes the supply of loanable funds.
B)   changes the demand for loanable funds.
C)   changes both the supply of and demand for loanable funds.
D)   does not influence the supply of or the demand for loanable funds.E) None of the above
F) C) and D)

Question 9

A municipal bond is

Accepted Answer

A)   issued by the federal government.
B)   issued by state and local governments.
C)   issued by corporations.
D)   issued by households.E) C) and D)
F) All of the above

Question 10

When a corporation experiences financial problems, bondholders are paid before stockholders.

Accepted Answer

A) True 
 B)False

Question 11

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

Accepted Answer

A)   $2.05.
B)   $5.00.
C)   $80.00
D)   $50.00.E) None of the above
F) A) and D)

Question 12

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) B) and D)
F) A) and B)

Question 13

Which of the following statements is correct?

Accepted Answer

A)   A large, well-known corporation such as Intel generally would use financial intermediation to finance expansion of its facilities.
B)   On average, managed funds outperform indexed funds.
C)   Unlike corporate bonds and stocks, checking accounts are a medium of exchange.
D)   A mutual fund is a financial market.E) None of the above
F) C) and D)

Question 14

Y = C + I + G + NX is an identity because

Accepted Answer

A)   each symbol identifies a macroeconomic variable.
B)   the right-hand and left-hand sides are equal when an equilibrium is reached.
C)   the equality holds due to the way the variables are defined.
D)   None of the above is correct.E) B) and D)
F) None of the above

Question 15

It is claimed that mutual funds have two advantages. The first is that mutual funds allow people with small amounts of money to diversify. The second is that mutual funds provide the skills of professional money managers who buy stocks they believe will be the most profitable and thereby increase the return that mutual fund depositors earn on their savings.

Accepted Answer

A)   Economists strongly agree with both claims.
B)   Economists are skeptical of both claims.
C)   Economists are skeptical of the first claim, but strongly agree with the second.
D)   Economists strongly agree with the first claim, but are skeptical of the second.E) All of the above
F) A) and C)

Question 16

Which of the following statements is correct?

Accepted Answer

A)   The expected future profitability of a corporation influences the demand for that corporation's stock.
B)   When a corporation sells stock as a means of raising funds it is engaging in debt finance.
C)   The owners of bonds sold by the Microsoft Corporation are part owners of that corporation.
D)   All bonds are, by definition, perpetuities.E) B) and C)
F) A) and D)

Question 17

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 18

When the government goes from running a balanced budget to running a budget surplus,

Accepted Answer

A)   national saving decreases, the interest rate rises, and the economy's long­run growth rate is likely to decrease.
B)   national saving increases, the interest rate falls, and the economy's long­run growth rate is likely to decrease.
C)   national saving decreases, the interest rate rises, and the economy's long­run growth rate is likely to increase.
D)   national saving increases, the interest rate falls, and the economy's long­run growth rate is likely to increase.E) All of the above
F) A) and B)

Question 19

Stocks and bonds

Accepted Answer

A)   and checking accounts are all stores of value and commonly function as mediums of exchange.
B)   and checking accounts are all stores of value, but only stocks and bonds commonly function as mediums of exchange.
C)   and checking accounts are all stores of value, but only checking accounts commonly function as mediums of exchange.
D)   and checking accounts all commonly function as mediums of exchange, but only stocks and bonds are a store of value.E) None of the above
F) A) and B)

Question 20

A decrease in government spending and the enactment of an investment tax credit would definitely cause

Accepted Answer

A)   the quantity of loanable funds traded to increase.
B)   the interest rate to increase.
C)   the quantity of loanable funds traded to decrease.
D)   the interest rate to decrease.E) A) and B)
F) None of the above

Exam 8: 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

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

A mutual fund

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

Other things the same, the effects of an increase in transfer payments on the government's budget deficit will lead to

Correct Answer
verified

Stocks and bonds

Correct Answer
verified

Correct Answer
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Which of the following statements is correct?

Correct Answer
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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

Y = C + I + G + NX is an identity because

Correct Answer
verified

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

Correct Answer
verified

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,

Correct Answer
verified

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

Correct Answer
verified

A decrease in government spending and the enactment of an investment tax credit would definitely cause

Correct Answer
verified

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

Correct Answer
verified

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Correct Answer
verified
The interest rate is below its...
View Answer

A municipal bond is

Correct Answer
verified

When the government goes from running a balanced budget to running a budget surplus,

Correct Answer
verified

When a corporation experiences financial problems, bondholders are paid before stockholders.

Correct Answer
verified

A budget deficit

Correct Answer
verified

Exam 8: 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

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A mutual fund

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

Other things the same, the effects of an increase in transfer payments on the government's budget deficit will lead to

Correct AnswerverifiedShow Answer

Stocks and bonds

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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

Y = C + I + G + NX is an identity because

Correct AnswerverifiedShow Answer

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

Correct AnswerverifiedShow Answer

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,

Correct AnswerverifiedShow Answer

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

Correct AnswerverifiedShow Answer

A decrease in government spending and the enactment of an investment tax credit would definitely cause

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Correct AnswerverifiedThe interest rate is below its...View AnswerShow Answer

A municipal bond is

Correct AnswerverifiedShow Answer

When the government goes from running a balanced budget to running a budget surplus,

Correct AnswerverifiedShow Answer

When a corporation experiences financial problems, bondholders are paid before stockholders.

Correct AnswerverifiedShow Answer

A budget deficit

Correct AnswerverifiedShow Answer

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

Correct Answer
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The interest rate is below its...
View Answer

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Correct Answer
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