Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

Suppose that Parliament were to institute an investment tax credit. What would most likely happen in the market for loanable funds?

Accepted Answer

A)  The demand for and supply for loanable funds would shift left. 
B)  The demand for and supply of loanable funds would shift left. 
C)  The demand for loanable funds would shift right. 
D)  The supply of loanable funds would shift right. 
A)  The demand for and supply for loanable funds would shift left. 
B)  The demand for and supply of loanable funds would shift left. 
C)  The demand for loanable funds would shift right. 
D)  The supply of loanable funds would shift right. C

Question 3

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

Accepted Answer

A) True 
 B)False  False

Question 4

Which list of bonds is ordered from the most interest to the least interest?

Accepted Answer

A)  corporate bond, municipal bond, federal government bond 
B)  corporate bond, federal government bond, municipal bond 
C)  municipal bond, federal government bond, corporate bond 
D)  municipal bond, corporate bond, federal government bond 
A)  corporate bond, municipal bond, federal government bond 
B)  corporate bond, federal government bond, municipal bond 
C)  municipal bond, federal government bond, corporate bond 
D)  municipal bond, corporate bond, federal government bond

Question 5

When will a change in the tax laws that increases the supply of loanable funds have a bigger effect on investment?

Accepted Answer

A)  when the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic 
B)  when the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic 
C)  when both the demand for and supply of loanable funds are more elastic 
D)  when both the demand for and supply of loanable funds are more inelastic 
A)  when the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic 
B)  when the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic 
C)  when both the demand for and supply of loanable funds are more elastic 
D)  when both the demand for and supply of loanable funds are more inelastic

Question 6

Recently, the Canadian government has gone from a surplus to a deficit. Assuming other things remain the same, what does this change mean?

Accepted Answer

A)  that the supply of loanable funds shifted right 
B)  that the supply of loanable funds shifted left 
C)  that the demand for loanable funds shifted right 
D)  that the demand for loanable funds shifted left 
A)  that the supply of loanable funds shifted right 
B)  that the supply of loanable funds shifted left 
C)  that the demand for loanable funds shifted right 
D)  that the demand for loanable funds shifted left

Question 7

Assuming that other things remain the same, what effect does a government budget deficit have on saving?

Accepted Answer

A)  It increases both private and national saving. 
B)  It increases public saving but reduces national saving. 
C)  It reduces both public and national saving. 
D)  It reduces private saving but increases national saving. 
A)  It increases both private and national saving. 
B)  It increases public saving but reduces national saving. 
C)  It reduces both public and national saving. 
D)  It reduces private saving but increases national saving.

Question 8

Which bond would you expect to pay the highest interest rate?

Accepted Answer

A)  a bond issued by the federal government 
B)  a bond issued by the Royal Bank of Canada 
C)  a bond issued by the province of Ontario 
D)  a bond issued by a new high-tech company 
A)  a bond issued by the federal government 
B)  a bond issued by the Royal Bank of Canada 
C)  a bond issued by the province of Ontario 
D)  a bond issued by a new high-tech company

Question 9

Which of the following is both a store of value and a common medium of exchange?

Accepted Answer

A)  corporate bonds 
B)  mutual funds 
C)  chequing account balances 
D)  a pension plan 
A)  corporate bonds 
B)  mutual funds 
C)  chequing account balances 
D)  a pension plan

Question 10

The demand for loanable funds comes from saving, and the supply of loanable funds comes from investment.

Accepted Answer

A) True 
 B)False

Question 11

What will happen to the interest on a bond as the bond's term increases?

Accepted Answer

A)  The bond will pay less interest because it has less risk. 
B)  The bond will pay less interest because it has more risk. 
C)  The bond will pay more interest because it has more risk. 
D)  The bond will pay more interest because it has less risk. 
A)  The bond will pay less interest because it has less risk. 
B)  The bond will pay less interest because it has more risk. 
C)  The bond will pay more interest because it has more risk. 
D)  The bond will pay more interest because it has less risk.

Question 12

What is public saving equal to?

Accepted Answer

A)  national saving 
B)  the total amount that consumers save 
C)  government spending plus transfers minus government revenue 
D)  government revenue minus government spending minus transfers 
A)  national saving 
B)  the total amount that consumers save 
C)  government spending plus transfers minus government revenue 
D)  government revenue minus government spending minus transfers

Question 13

Which expression represents national saving in a closed economy?

Accepted Answer

A)  Y - I - G - NX 
B)  Y - C - G 
C)  Y - I - C 
D)  G + C - Y 
A)  Y - I - G - NX 
B)  Y - C - G 
C)  Y - I - C 
D)  G + C - Y

Question 14

Patrick wants to start his own dental practice, but his expenditures exceed his income. Which statement best describes Patrick?

Accepted Answer

A)  He is a saver who demands money from the financial system. 
B)  He is a saver who supplies money to the financial system. 
C)  He is a borrower who demands money from the financial system. 
D)  He is a borrower who supplies money to the financial system. 
A)  He is a saver who demands money from the financial system. 
B)  He is a saver who supplies money to the financial system. 
C)  He is a borrower who demands money from the financial system. 
D)  He is a borrower who supplies money to the financial system.

Question 15

If the nominal interest rate is 8 percent and the real interest rate is 2 percent, what is the inflation rate?

Accepted Answer

A)  4 percent 
B)  6 percent 
C)  10 percent 
D)  16 percent 
A)  4 percent 
B)  6 percent 
C)  10 percent 
D)  16 percent

Question 16

Rogier's income exceeds his expenditures. Which statement best describes Rogier?

Accepted Answer

A)  He is a saver who demands money from the financial system. 
B)  He is a saver who supplies money to the financial system. 
C)  He is a borrower who demands money from the financial system. 
D)  He is a borrower who supplies money to the financial system. 
A)  He is a saver who demands money from the financial system. 
B)  He is a saver who supplies money to the financial system. 
C)  He is a borrower who demands money from the financial system. 
D)  He is a borrower who supplies money to the financial system.

Question 17

If the government's expenditures exceeded its receipts, what would it most likely do?

Accepted Answer

A)  It would lend money to a bank or other financial intermediary. 
B)  It would borrow money from a bank or other financial intermediary. 
C)  It would directly buy bonds from the public. 
D)  It would directly sell bonds to the public. 
A)  It would lend money to a bank or other financial intermediary. 
B)  It would borrow money from a bank or other financial intermediary. 
C)  It would directly buy bonds from the public. 
D)  It would directly sell bonds to the public.

Question 18

Your cousin wants to buy either stock or bonds in Holistic Healing Inc., but he isn't sure which to buy. Explain how each of his quotes below should affect his choice between the stock and the bond.
a. "I have reason to believe that the company will be announcing a new holistic remedy that has amazing health benefits."
b. "I would like to tell people I am part owner of Holistic Healing Inc."
c. "I do not want to take on much risk."

Accepted Answer

a. Presumably, when this happens, unless

Question 19

Which term refers to a certificate of indebtedness that specifies the obligations of the borrower to the holder?

Accepted Answer

A)  bond 
B)  stock 
C)  mutual fund 
D)  savings plan 
A)  bond 
B)  stock 
C)  mutual fund 
D)  savings plan

Question 20

In a closed economy GDP = $1400, private saving = $225, government budget deficit = $15, and government spending $25 (all numbers are in billions). Calculate national saving, taxes, and consumption.

Accepted Answer

National saving = private saving + publi

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

Suppose that Parliament were to institute an investment tax credit. What would most likely happen in the market for loanable funds?

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

Which list of bonds is ordered from the most interest to the least interest?

When will a change in the tax laws that increases the supply of loanable funds have a bigger effect on investment?

Recently, the Canadian government has gone from a surplus to a deficit. Assuming other things remain the same, what does this change mean?

Assuming that other things remain the same, what effect does a government budget deficit have on saving?

Which bond would you expect to pay the highest interest rate?

Which of the following is both a store of value and a common medium of exchange?

The demand for loanable funds comes from saving, and the supply of loanable funds comes from investment.

What will happen to the interest on a bond as the bond's term increases?

What is public saving equal to?

Which expression represents national saving in a closed economy?

Patrick wants to start his own dental practice, but his expenditures exceed his income. Which statement best describes Patrick?

If the nominal interest rate is 8 percent and the real interest rate is 2 percent, what is the inflation rate?

Rogier's income exceeds his expenditures. Which statement best describes Rogier?

If the government's expenditures exceeded its receipts, what would it most likely do?

Which term refers to a certificate of indebtedness that specifies the obligations of the borrower to the holder?

In a closed economy GDP = $1400, private saving = $225, government budget deficit = $15, and government spending $25 (all numbers are in billions). Calculate national saving, taxes, and consumption.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 8: Saving, Investment, and the Financial System

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

Suppose that Parliament were to institute an investment tax credit. What would most likely happen in the market for loanable funds?

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

Which list of bonds is ordered from the most interest to the least interest?

When will a change in the tax laws that increases the supply of loanable funds have a bigger effect on investment?

Recently, the Canadian government has gone from a surplus to a deficit. Assuming other things remain the same, what does this change mean?

Assuming that other things remain the same, what effect does a government budget deficit have on saving?

Which bond would you expect to pay the highest interest rate?

Which of the following is both a store of value and a common medium of exchange?

The demand for loanable funds comes from saving, and the supply of loanable funds comes from investment.

What will happen to the interest on a bond as the bond's term increases?

What is public saving equal to?

Which expression represents national saving in a closed economy?

Patrick wants to start his own dental practice, but his expenditures exceed his income. Which statement best describes Patrick?

If the nominal interest rate is 8 percent and the real interest rate is 2 percent, what is the inflation rate?

Rogier's income exceeds his expenditures. Which statement best describes Rogier?

If the government's expenditures exceeded its receipts, what would it most likely do?

Which term refers to a certificate of indebtedness that specifies the obligations of the borrower to the holder?

In a closed economy GDP = $1400, private saving = $225, government budget deficit = $15, and government spending $25 (all numbers are in billions). Calculate national saving, taxes, and consumption.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters