Question 1

For a closed economy,GDP is $11 trillion,consumption is $7 trillion,taxes are $3 trillion and the government runs a surplus of $1 trillion.What are private saving and national saving?

Accepted Answer

A)   $4 trillion and $1 trillion,respectively
B)   $4 trillion and $5 trillion,respectively
C)   $1 trillion and $2 trillion,respectively
D)   $1 trillion and $1 trillion,respectivelyE) None of the above
F) B) and C)

Question 2

Which of the following is not correct?

Accepted Answer

A)   If you buy a bond from a corporation,you can sell the bond to someone else before it matures.
B)   Term refers to the scheduling of periodic interest rate payments on a bond.
C)   A bond is an IOU.
D)   There are millions of different bonds in the U.S.economy.E) B) and C)
F) None of the above

Question 3

Consider three different closed economies with the following national income statistics.Country A has taxes of $40 billion,transfers of $20 billion,and government expenditures on goods and services of $30 billion.County B has private savings of $60 billion,and investment expenditures of $50 billion.Country C has GDP of $300 billion,investment of $70,consumption of $180 billion,taxes of $60 billion and transfers of $20 billion.From this information we know that there is a $10 billion government budget deficit for

Accepted Answer

A)   only country A.
B)   only country B.
C)   only country C.
D)   all three countries.E) C) and D)
F) All of the above

Question 4

In 2002 mortgage rates fell and mortgage lending increased.Which of the following could explain both of these changes?

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 B)
F) B) and C)

Question 5

In addition to

Accepted Answer

A)   performing financial intermediation,banks are important in that they help create a medium of exchange.
B)   serving as financial markets,mutual funds are important in that they help create a store of value.
C)   serving as stores of value,stocks and bonds also serve as media of exchange.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 6

If Congress instituted an investment tax credit,the demand for loanable funds would shift rightward.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is correct?

Accepted Answer

A)   As a group,economists see no purpose in distinguishing between the nominal interest rate and the real interest rate.
B)   The interest rate that is usually reported is the nominal interest rate.
C)   If the nominal interest rate increases and the inflation rate remains unchanged,then the real interest rate decreases.
D)   All of the above are correct.E) A) and C)
F) B) and D)

Question 8

Table 26-1
 
-Refer to Table 26-1.Which firm had the P/E ratio that was closest to the historically typical P/E ratio?

Accepted Answer

A)   GenMills
B)   Gillette
C)   Graco
D)   HersheyE) A) and B)
F) A) and C)

Question 9

A decrease in taxes on interest income would increase the interest rate.

Accepted Answer

A) True 
 B)False

Question 10

The identity that shows that total income and total expenditure are equal is

Accepted Answer

A)   GDP = Y.
B)   Y = DI + T + NX.
C)   GDP = GNP - NX.
D)   Y = C + I + G + NX.E) A) and B)
F) A) and C)

Question 11

If in the past Congress had taken additional actions to make saving more rewarding,then today it is likely that the equilibrium interest rate

Accepted Answer

A)   and the equilibrium quantity of loanable funds both would be lower.
B)   and the equilibrium quantity of loanable funds both would be higher.
C)   would be higher and the equilibrium quantity of loanable funds would be lower.
D)   would be lower and the equilibrium quantity of loanable funds would be higher.E) C) and D)
F) B) and D)

Question 12

If Huedepool Beer runs into financial difficulty,the stockholders as

Accepted Answer

A)   part owners of Huedepool are paid before bondholders get paid anything at all.
B)   part owners of Huedepool are paid after bondholders get paid.
C)   creditors of Huedepool are paid before bondholders get paid anything at all.
D)   creditors of Huedepool are paid after bondholders get paid.E) All of the above
F) A) and C)

Question 13

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 26-3.Which of the following movements shows the effects of a new law that makes more people than before eligible for Individual Retirement Accounts?

Accepted Answer

A)   a movement from Point A to Point B
B)   a movement from Point B to Point F
C)   a movement from Point C to Point F
D)   a movement from Point C to Point BE) A) and C)
F) B) and C)

Question 14

Compared to short-term bonds,other things the same,long-term bonds generally have

Accepted Answer

A)   more risk and so they pay higher interest rates.
B)   less risk and so they pay lower interest rates.
C)   less risk and so they pay higher interest rates.
D)   about the same risk and so they pay about the same interest rate.E) B) and C)
F) None of the above

Question 15

When the government budget deficit rises,national saving is reduced,interest rates rise,and investment falls.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would a macroeconomist consider as investment?

Accepted Answer

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

Question 17

Which of the following is correct?

Accepted Answer

A)   In a closed economy equilibrium in the market for loanable funds occurs where saving = investment.
B)   Investment is the source for the supply of loanable funds.
C)   If there is a surplus in the market for loanable funds,the interest rate rises.
D)   All of the above are correctE) B) and C)
F) A) and D)

Question 18

Suppose that you are a broker and people tell you the following about themselves.What sort of bond would you recommend to each? Defend your choices.
a.
"I am in a high federal income tax bracket and I don't want to take very much risk."
b.
"I want a high return and I am willing to take a lot of risk to get it."
c.
"I want a decent return and I have enough deductions that I don't value tax breaks highly."

Accepted Answer

a.
A municipal bond.Municipal bonds gene...

Question 19

When opening a print shop you need to buy printers,computers,furniture,and similar items.Economists call these expenditures

Accepted Answer

A)   capital investment.
B)   investment in human capital.
C)   business consumption expenditures.
D)   personal saving.E) B) and D)
F) A) and B)

Question 20

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market.We would expect that the

Accepted Answer

A)   supply of existing shares of the stock and the price will both rise.
B)   supply of existing shares of the stock and the price will both fall.
C)   demand for existing shares of the stock and the price will both rise.
D)   demand for existing shares of the stock and the price will both fall.E) A) and B)
F) None of the above

Exam 26: Saving, investment, and the Financial System

If Huedepool Beer runs into financial difficulty,the stockholders as

Correct Answer
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Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3.Which of the following movements shows the effects of a new law that makes more people than before eligible for Individual Retirement Accounts?

Correct Answer
verified

For a closed economy,GDP is $11 trillion,consumption is $7 trillion,taxes are $3 trillion and the government runs a surplus of $1 trillion.What are private saving and national saving?

Correct Answer
verified

A decrease in taxes on interest income would increase the interest rate.

Correct Answer
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Table 26-1 -Refer to Table 26-1.Which firm had the P/E ratio that was closest to the historically typical P/E ratio?

Correct Answer
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In addition to

Correct Answer
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Which of the following is correct?

Correct Answer
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Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market.We would expect that the

Correct Answer
verified

If in the past Congress had taken additional actions to make saving more rewarding,then today it is likely that the equilibrium interest rate

Correct Answer
verified

If Congress instituted an investment tax credit,the demand for loanable funds would shift rightward.

Correct Answer
verified

Compared to short-term bonds,other things the same,long-term bonds generally have

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
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The identity that shows that total income and total expenditure are equal is

Correct Answer
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Correct Answer
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When opening a print shop you need to buy printers,computers,furniture,and similar items.Economists call these expenditures

Correct Answer
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Which of the following is not correct?

Correct Answer
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Correct Answer
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a.
A municipal bond.Municipal bonds gene...
View Answer

In 2002 mortgage rates fell and mortgage lending increased.Which of the following could explain both of these changes?

Correct Answer
verified

When the government budget deficit rises,national saving is reduced,interest rates rise,and investment falls.

Correct Answer
verified

Which of the following would a macroeconomist consider as investment?

Correct Answer
verified

Exam 26: Saving, investment, and the Financial System

If Huedepool Beer runs into financial difficulty,the stockholders as

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.Which of the following movements shows the effects of a new law that makes more people than before eligible for Individual Retirement Accounts?

Correct AnswerverifiedShow Answer

For a closed economy,GDP is $11 trillion,consumption is $7 trillion,taxes are $3 trillion and the government runs a surplus of $1 trillion.What are private saving and national saving?

Correct AnswerverifiedShow Answer

A decrease in taxes on interest income would increase the interest rate.

Correct AnswerverifiedShow Answer

Table 26-1 -Refer to Table 26-1.Which firm had the P/E ratio that was closest to the historically typical P/E ratio?

Correct AnswerverifiedShow Answer

In addition to

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market.We would expect that the

Correct AnswerverifiedShow Answer

If in the past Congress had taken additional actions to make saving more rewarding,then today it is likely that the equilibrium interest rate

Correct AnswerverifiedShow Answer

If Congress instituted an investment tax credit,the demand for loanable funds would shift rightward.

Correct AnswerverifiedShow Answer

Compared to short-term bonds,other things the same,long-term bonds generally have

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The identity that shows that total income and total expenditure are equal is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When opening a print shop you need to buy printers,computers,furniture,and similar items.Economists call these expenditures

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.A municipal bond.Municipal bonds gene...View AnswerShow Answer

In 2002 mortgage rates fell and mortgage lending increased.Which of the following could explain both of these changes?

Correct AnswerverifiedShow Answer

When the government budget deficit rises,national saving is reduced,interest rates rise,and investment falls.

Correct AnswerverifiedShow Answer

Which of the following would a macroeconomist consider as investment?

Correct AnswerverifiedShow Answer

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a.
A municipal bond.Municipal bonds gene...
View Answer

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