Question 1

If Congress increased the tax rate on interest income, investment

Accepted Answer

A)  would increase and saving would decrease.
B)  would decrease and saving would increase.
C)  and saving would increase.
D)  and saving would decrease.E) A) and B)
F) A) and C)

Question 2

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

Question 3

Camp Company had total earnings of $600 million in 2008, out of which it retained $150 million for future investments. In 2008, its stock featured a dividend yield of 3 percent and 200 million shares were outstanding. The price-earnings ratio for Camp Company stock was

Accepted Answer

A)  8.33.
B)  12.00.
C)  16.67.
D)  25.00.E) None of the above
F) A) and D)

Question 4

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

Question 5

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

Accepted Answer

A) True 
 B)False

Question 6

The source of the supply of loanable funds is

Accepted Answer

A)  saving, and the source of the demand for loanable funds is investment.
B)  consumption, and the source of the demand for loanable funds is investment.
C)  investment, and the source of the demand for loanable funds is saving.
D)  the interest rate, and the source of the demand for loanable funds is saving.E) None of the above
F) All of the above

Question 7

An increase in the budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 8

Explain why the demand for loanable funds slopes downward and why the supply of loanable funds slopes upward.

Accepted Answer

When the interest rate rises investment ...

Question 9

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

Question 10

Table 13-2
   Stack  Sym  Yld %  P/E  Val 100s  Hi  Lo  Clase  Nat  Che.  Baeing Ca.  BA 1.5530.484,531,60064.7863.7064.62+.93 Eli Lily and Cu.  LLY 2.6029.713,765,70058.9858.2158.52+.16 H. J. Heinz and Ca.  HNZ 3.3015.331,350,20036.5536.2636.33+.21 Kellog Cu.  K 2.2220.501,990,60045.7245.2045.50+.24\begin{array} { | l | l | l | l | l | l | l | l | l | } \hline 	ext { Stack } & 	ext { Sym } & 	ext { Yld \% } & 	ext { P/E } & 	ext { Val 100s } & 	ext { Hi } & 	ext { Lo } & 	ext { Clase } & \begin{array} { l } 	ext { Nat } \	ext { Che. }\end{array} \\hline 	ext { Baeing Ca. } & 	ext { BA } & 1.55 & 30.48 & 4,531,600 & 64.78 & 63.70 & 64.62 & + .93 \\hline 	ext { Eli Lily and Cu. } & 	ext { LLY } & 2.60 & 29.71 & 3,765,700 & 58.98 & 58.21 & 58.52 & + .16 \\hline 	ext { H. J. Heinz and Ca. } & 	ext { HNZ } & 3.30 & 15.33 & 1,350,200 & 36.55 & 36.26 & 36.33 & + .21 \\hline 	ext { Kellog Cu. } & 	ext { K } & 2.22 & 20.50 & 1,990,600 & 45.72 & 45.20 & 45.50 & + .24 \\hline\end{array} Stack  Baeing Ca.  Eli Lily and Cu.  H. J. Heinz and Ca.  Kellog Cu. ​ Sym  BA  LLY  HNZ  K ​ Yld % 1.552.603.302.22​ P/E 30.4829.7115.3320.50​ Val 100s 4,531,6003,765,7001,350,2001,990,600​ Hi 64.7858.9836.5545.72​ Lo 63.7058.2136.2645.20​ Clase 64.6258.5236.3345.50​ Nat  Che. ​+.93+.16+.21+.24​​ 
-Refer to Table 13-2. Which company had the lowest earnings per share?

Accepted Answer

A)  Boeing Co.
B)  Eli Lilly and Co.
C)  H. J. Heinz and Co.
D)  Kellog Co. E) A) and C)
F) A) and D)

Question 11

In the late summer of 2005 some regions of the country were suffering from drought. What effect would we expect this to have on the stock of companies such as John Deere that manufacture farm equipment?

Accepted Answer

A)  raise the demand for existing shares of the stock, causing the price to rise
B)  decrease the demand for existing shares of the stock, causing the price to fall
C)  raise the supply of the existing shares of stock, causing the price to rise
D)  raise the supply of the existing shares of stock, causing the price to fallE) B) and C)
F) None of the above

Question 12

Stock represents

Accepted Answer

A)  a claim to a share of the profits of a firm.
B)  ownership in a firm.
C)  equity finance.
D)  All of the above are correctE) A) and D)
F) C) and D)

Question 13

Figure 13-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 13-3. What, specifically, does the label on the vertical axis, i, represent?

Accepted Answer

A)  the nominal interest rate
B)  the real interest rate
C)  the inflation rate
D)  the dividend yieldE) B) and D)
F) C) and D)

Question 14

If the government currently has a budget deficit, then

Accepted Answer

A)  it does not necessarily have a debt.
B)  its debt is increasing.
C)  government expenditures are greater than taxes.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 15

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions. If things turn out as they plan,

Accepted Answer

A)  the price of a share of stock in the Hudsucker corporation should decline as the demand for shares falls.
B)  the price of a share of stock in the Hudsucker corporation should rise as the demand for shares rises.
C)  the price of a share of stock in the Hudsucker corporation should decline as the supply of existing shares falls.
D)  the price of a share of stock in the Hudsucker corporation should rise as the supply of existing shares rises.E) C) and D)
F) All of the above

Question 16

If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

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

Question 18

You hold bonds issued by the city of Sacramento, California. The interest you earn each year on these bonds

Accepted Answer

A)  is not subject to federal income tax and so these bonds pay a higher interest rate than otherwise comparable bonds issued by the U.S. government.
B)  is not subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S. government.
C)  is subject to federal income tax and so these bonds pay a higher interest rate than otherwise comparable bonds issued by the U.S. government.
D)  is subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S. government.E) B) and C)
F) A) and D)

Question 19

A government reduces its budget deficit, but at the same time people become concerned that the outlook for future government expenditures and revenues increase the chance it will default. Which of the following is correct.

Accepted Answer

A)  The reduced budget deficit will raise interest rates in general. The increased risk of default will raise interest rates on government bonds.
B)  The reduced budget deficit will raise interest rates in general. The increased risk of default will reduce interest rates on government bonds.
C)  The reduced budget deficit will reduce interest rates in general. The increased risk of default will raise interest rates on government bonds.
D)  The reduced budget deficit will reduce interest rates in general. The increased risk of default will reduce interest rates on government bonds.E) B) and C)
F) None of the above

Question 20

Which advantage(s)  do mutual funds claim to provide?

Accepted Answer

A)  diversification and access to the skills of professional money managers
B)  diversification but not access to the skills of professional money managers
C)  access to the skills of professional money managers but not diversification
D)  neither diversification nor access to the skills of professional money managers.E) A) and B)
F) B) and C)

Exam 13: Saving, Investment, and the Financial System

Camp Company had total earnings of $600 million in 2008, out of which it retained $150 million for future investments. In 2008, its stock featured a dividend yield of 3 percent and 200 million shares were outstanding. The price-earnings ratio for Camp Company stock was

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Stock represents

Correct Answer
verified

Figure 13-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 13-3. What, specifically, does the label on the vertical axis, i, represent?

Correct Answer
verified

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions. If things turn out as they plan,

Correct Answer
verified

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

Correct Answer
verified

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

In the late summer of 2005 some regions of the country were suffering from drought. What effect would we expect this to have on the stock of companies such as John Deere that manufacture farm equipment?

Correct Answer
verified

If Congress increased the tax rate on interest income, investment

Correct Answer
verified

A government reduces its budget deficit, but at the same time people become concerned that the outlook for future government expenditures and revenues increase the chance it will default. Which of the following is correct.

Correct Answer
verified

An increase in the budget deficit shifts the demand for loanable funds to the right.

Correct Answer
verified

Which advantage(s) do mutual funds claim to provide?

Correct Answer
verified

You hold bonds issued by the city of Sacramento, California. The interest you earn each year on these bonds

Correct Answer
verified

Explain why the demand for loanable funds slopes downward and why the supply of loanable funds slopes upward.

Correct Answer
verified
When the interest rate rises investment ...
View Answer

If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

Correct Answer
verified

The source of the supply of loanable funds is

Correct Answer
verified

If the government currently has a budget deficit, then

Correct Answer
verified

Stocks and bonds

Correct Answer
verified

Exam 13: Saving, Investment, and the Financial System

Camp Company had total earnings of $600 million in 2008, out of which it retained $150 million for future investments. In 2008, its stock featured a dividend yield of 3 percent and 200 million shares were outstanding. The price-earnings ratio for Camp Company stock was

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Stock represents

Correct AnswerverifiedShow Answer

Figure 13-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 13-3. What, specifically, does the label on the vertical axis, i, represent?

Correct AnswerverifiedShow Answer

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions. If things turn out as they plan,

Correct AnswerverifiedShow Answer

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

Correct AnswerverifiedShow Answer

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

In the late summer of 2005 some regions of the country were suffering from drought. What effect would we expect this to have on the stock of companies such as John Deere that manufacture farm equipment?

Correct AnswerverifiedShow Answer

If Congress increased the tax rate on interest income, investment

Correct AnswerverifiedShow Answer

A government reduces its budget deficit, but at the same time people become concerned that the outlook for future government expenditures and revenues increase the chance it will default. Which of the following is correct.

Correct AnswerverifiedShow Answer

An increase in the budget deficit shifts the demand for loanable funds to the right.

Correct AnswerverifiedShow Answer

Which advantage(s) do mutual funds claim to provide?

Correct AnswerverifiedShow Answer

You hold bonds issued by the city of Sacramento, California. The interest you earn each year on these bonds

Correct AnswerverifiedShow Answer

Explain why the demand for loanable funds slopes downward and why the supply of loanable funds slopes upward.

Correct AnswerverifiedWhen the interest rate rises investment ...View AnswerShow Answer

If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

Correct AnswerverifiedShow Answer

The source of the supply of loanable funds is

Correct AnswerverifiedShow Answer

If the government currently has a budget deficit, then

Correct AnswerverifiedShow Answer

Stocks and bonds

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When the interest rate rises investment ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified