Exam 8: Saving, Investment, and the Financial System

Isabella is interested only in the rate of interest and is willing to take a great deal of risk in exchange for a high return. Which bond should she look for?

What is the effect of an increase in the tax rate on interest income on the supply of and the demand for loanable funds?

Suppose the Canadian government allowed taxpayers to earn their first $5000 interest free of income tax. How would this shift the supply of, or demand for, loanable funds?

If there is shortage of loanable funds, what is most likely to happen?

What is a medium of exchange?

How does the supply of loanable funds curve slope?

What makes Y = C + I + G + NX an identity?

A company releases the following information: Number of shares (in thousands) = 8500 Dividend = $0.17 Dividend yield = 0.9% Profit (in thousands) = $1700 a. Calculate the share price. b. Calculate the market value of the firm (the total value of the firm's shares). c. Calculate earnings per share and the P/E ratio. d. Is this company expensive relative to its earnings?

In the national income accounting identity showing the equality between national saving and investment, what is the representation of private saving and what is the representation of public saving?

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

If other things are the same, will countries that tax less on saving have lower or higher interest rates and investment than other countries?

What would most likely happen in the market for loanable funds if the government were to decrease the tax on interest income?

Public saving is equal to national saving minus private saving.

What is a dividend yield?

If the current market interest rate for loanable funds is below the equilibrium level, what would we expect to happen?

If Parliament instituted an investment tax credit, the demand for loanable funds would shift right.

How does the risk of long-term bonds compare with short-term bonds?

Which of the following identities shows that GDP is both total income and total expenditure?

Draw and label a graph showing equilibrium in the market for loanable funds.

The country of Nemedia does not trade with any other country. Its GDP is $20 billion. Its government collects $4 billion in taxes and pays out $3 billion to households in the form of transfer payments. Consumption equals $13 billion, and investment equals $2 billion. What is the value of the goods and services purchased by the government of Nemedia?