Question 1

Volume, as reported in stock tables, refers to the

Accepted Answer

A)   number of shares traded.
B)   percentage of shares outstanding traded.
C)   number of shares traded times the price they sold at.
D)   number of shares of a company traded divided by the shares of all companies traded.E) B) and D)
F) All of the above

Question 2

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

Question 3

Scenario 26-1. Assume the following information for an imaginary, closed economy.
GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000.
-Refer to Scenario 26-1. For this economy, consumption amounts to

Accepted Answer

A)   $68,000.
B)   $38,000.
C)   $53,000.
D)   $60,000.E) None of the above
F) A) and B)

Question 4

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market?

Accepted Answer

A)   an increase in the supply of or a decrease in the demand for loanable funds
B)   an increase in the supply of or an increase in the demand for loanable funds
C)   a decrease in the supply of or a decrease in the demand for loanable funds
D)   a decrease in the supply of or an increase in the demand for loanable fundsE) A) and D)
F) A) and B)

Question 5

Which of the following people purchased the correct asset to meet his or her objective?

Accepted Answer

A)   Michelle wanted to be a part owner of Mamma Rosa's Pizza, so she purchased a bond issued by Mamma Rosa's Pizza.
B)   Tim wanted a high return, even if it meant taking some risk, so he purchased stock issued by Specific Electric instead of bonds issued by Specific Electric.
C)   Jennifer wanted to buy equity in Honda, so she purchased bonds sold by Honda.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 6

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

Accepted Answer

A)   corporate bond, municipal bond, U.S. government bond
B)   corporate bond, U.S. government bond, municipal bond
C)   municipal bond, U.S. government bond, corporate bond
D)   U.S. government bond, municipal bond, corporate bondE) B) and C)
F) B) and D)

Question 7

Which of the following restrictions implies that investment exceeds private saving for a closed economy?

Accepted Answer

A)   The economy has no government.
B)   The economy's government is running a budget deficit.
C)   The economy's government is running a budget surplus.
D)   No restriction is necessary; investment and private saving are equal for all closed economies.E) C) and D)
F) None of the above

Question 8

Retained earnings are

Accepted Answer

A)   earnings of a company that are not paid out to stockholders.
B)   the amount of revenue a corporation receives for the sale of its products minus its costs of production as measured by its accountants.
C)   the single most important piece of information about a stock.
D)   computed by multiplying the dividend yield by the price of the stock.E) A) and D)
F) B) and C)

Question 9

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, GDP equals

Accepted Answer

A)   $1,480.
B)   $1,505.
C)   $1,460
D)   $1,455.E) A) and B)
F) None of the above

Question 10

As chief financial officer you sell newly issued bonds on behalf of your firm. Your firm is

Accepted Answer

A)   borrowing directly.
B)   borrowing indirectly.
C)   lending directly.
D)   lending indirectly.E) None of the above
F) C) and D)

Question 11

A corporation's earnings are the amount of revenue it receives for the sale of its products

Accepted Answer

A)   minus its cost of production as measured by its accountants. Earnings must be paid out as dividends.
B)   minus its cost of production as measured by its accountants. Earnings may be paid out as dividends or retained by the corporation.
C)   minus its direct and indirect costs as measured by its economists. Earnings must be paid out as dividends.
D)   minus its direct and indirect cost as measure by its economists. Earnings may be paid out as dividends or retained by the corporation.E) B) and D)
F) B) and C)

Question 12

The ratio of debt to GDP in the United States

Accepted Answer

A)   tends to rise during wars.
B)   rose during the decade that began in 2001.
C)   fell during the late 1990s.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 13

If the tax revenue of the federal government is less than its spending, then the federal government necessarily

Accepted Answer

A)   runs a budget deficit.
B)   runs a budget surplus.
C)   runs a national debt.
D)   will increase taxes.E) None of the above
F) A) and C)

Question 14

In the loanable funds model, an increase in an investment tax credit would create a

Accepted Answer

A)   shortage at the former equilibrium interest rate. This shortage would lead to a rise in the interest rate.
B)   shortage at the former equilibrium interest rate. This shortage would lead to a fall in the interest rate.
C)   surplus at the former equilibrium interest rate. This surplus would lead to a rise in the interest rate.
D)   surplus at the former equilibrium interest rate. This surplus would lead to a fall in the interest rate.E) A) and D)
F) B) and D)

Question 15

Which of the following bonds has the highest interest rate?

Accepted Answer

A)   a high credit risk and a short term.
B)   a low credit risk and a short term.
C)   a long term and a high credit risk.
D)   a long term and a low credit risk.E) All of the above
F) B) and D)

Question 16

Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds to buy new machinery for one of its breweries.

Accepted Answer

A)   Fran and Miller are both investing.
B)   Fran and Miller are both saving.
C)   Fran is investing; Miller is saving.
D)   Fran is saving; Miller is investing.E) All of the above
F) C) and D)

Question 17

Net exports must equal zero for any economy

Accepted Answer

A)   that is closed.
B)   for which Y = C + I + G.
C)   for which S = Y - C - G.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 18

Skyline Chili wants to finance the purchase of new equipment for its restaurants. The firm has limited internal funds, so Skyline likely will

Accepted Answer

A)   demand funds from the financial system by buying bonds.
B)   demand funds from the financial system by selling bonds.
C)   supply funds to the financial system by buying bonds.
D)   supply funds to the financial system by selling bonds.E) A) and C)
F) None of the above

Question 19

Queen City Sausage stock is selling at $40 per share, it has retained earnings of $1.00 per share, and dividends of $1.00 per share. What is the price-earnings ratio and what is the dividend yield?

Accepted Answer

A)   20, 2.5 percent.
B)   20, 5 percent.
C)   40, 2.5 percent.
D)   40, 5 percent.E) B) and C)
F) None of the above

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 18: Saving, Investment, and the Financial System

A corporation's earnings are the amount of revenue it receives for the sale of its products

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Which of the following bonds has the highest interest rate?

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Which of the following restrictions implies that investment exceeds private saving for a closed economy?

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

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Skyline Chili wants to finance the purchase of new equipment for its restaurants. The firm has limited internal funds, so Skyline likely will

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Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

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Volume, as reported in stock tables, refers to the

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If the tax revenue of the federal government is less than its spending, then the federal government necessarily

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The ratio of debt to GDP in the United States

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Net exports must equal zero for any economy

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Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds to buy new machinery for one of its breweries.

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Which of the following people purchased the correct asset to meet his or her objective?

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As chief financial officer you sell newly issued bonds on behalf of your firm. Your firm is

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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, GDP equals

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Queen City Sausage stock is selling at $40 per share, it has retained earnings of $1.00 per share, and dividends of $1.00 per share. What is the price-earnings ratio and what is the dividend yield?

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Retained earnings are

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Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. -Refer to Scenario 26-1. For this economy, consumption amounts to

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Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market?

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In the loanable funds model, an increase in an investment tax credit would create a

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A municipal bond is

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