Question 1

In the terminology of macroeconomics, what's the difference between a saver and an investor?

Accepted Answer

A saver earns more than he spe

Question 2

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,000, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

Accepted Answer

A) -500 
B) 500 
C) 2,000 
D) None of the above is correct. 
A) -500 
B) 500 
C) 2,000 
D) None of the above is correct.

Question 3

Suppose a country has a larger increase in debt in 2014 than it had in 2013. Then other things the same,

Accepted Answer

A) the supply of loanable funds shifts rightward and the interest rate falls. 
B) the supply of loanable funds shifts leftward and the interest rate rises. 
C) the demand for loanable funds shifts leftward and the interest rate falls. 
D) the demand for loanable funds shifts rightward and the interest rate rises. 
A) the supply of loanable funds shifts rightward and the interest rate falls. 
B) the supply of loanable funds shifts leftward and the interest rate rises. 
C) the demand for loanable funds shifts leftward and the interest rate falls. 
D) the demand for loanable funds shifts rightward and the interest rate rises.

Question 4

​The nominal interest rate increases by 5 percent. What is the effect on investment?

Accepted Answer

A) The real interest rate increases and investment increases 
B) ​The real interest rate decreases and investment decreases. 
C) ​The real interest rate increases and investment decreases. 
D) ​Cannot be determined from the given information 
A) The real interest rate increases and investment increases 
B) ​The real interest rate decreases and investment decreases. 
C) ​The real interest rate increases and investment decreases. 
D) ​Cannot be determined from the given information

Question 5

Which of the following would both make the interest rate on a bond higher than otherwise?

Accepted Answer

A) the interest it pays is taxed and it is long term 
B) the interest it pays is taxed and it is short term 
C) the interest it pays is tax exempt and it is long term 
D) the interest it pays is tax exempt and it is short term 
A) the interest it pays is taxed and it is long term 
B) the interest it pays is taxed and it is short term 
C) the interest it pays is tax exempt and it is long term 
D) the interest it pays is tax exempt and it is short term

Question 6

Use the following table to answer the following questions.
Table 26-2  
-Refer to Table 26-2. Which company had the lowest earnings per share?

Accepted Answer

A) Boeing Co. 
B) Eli Lilly and Co. 
C) Kraft 
D) Kellogg Co. 
A) Boeing Co. 
B) Eli Lilly and Co. 
C) Kraft 
D) Kellogg Co.

Question 7

Atlas Corporation is in sound financial condition. It sells a long-term bond. Which of the following make the interest rate on this bond lower than otherwise?

Accepted Answer

A) Both Altas' sound finances and the long term of the bond. 
B) Atlas' sound finances but not the long term of the bond. 
C) The long term of the bond but not Atlas' sound finances. 
D) Neither Atlas' sound finances nor the long term of the bond. 
A) Both Altas' sound finances and the long term of the bond. 
B) Atlas' sound finances but not the long term of the bond. 
C) The long term of the bond but not Atlas' sound finances. 
D) Neither Atlas' sound finances nor the long term of the bond.

Question 8

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Accepted Answer

Investment spending

Question 9

A checking deposit functions as

Accepted Answer

A) a medium of exchange and as a store of value. 
B) a medium of exchange, but not as a store of value. 
C) a store of value, but not as a medium of exchange. 
D) neither a medium of exchange nor as a store of value. 
A) a medium of exchange and as a store of value. 
B) a medium of exchange, but not as a store of value. 
C) a store of value, but not as a medium of exchange. 
D) neither a medium of exchange nor as a store of value.

Question 10

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. 
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.

Question 11

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

Accepted Answer

A) Interest rates would rise. 
B) Interest rates would be unaffected. 
C) Interest rates would fall. 
D) The effect on the interest rate is uncertain. 
A) Interest rates would rise. 
B) Interest rates would be unaffected. 
C) Interest rates would fall. 
D) The effect on the interest rate is uncertain.

Question 12

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

Accepted Answer

the intere

Question 13

Alpha Corporation has a price of $5 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio which is

Accepted Answer

A) high, perhaps indicating that people expect future earnings to rise. 
B) high, perhaps indicating that people expect future earnings to fall. 
C) low, perhaps indicating that people expect future earnings to rise. 
D) low, perhaps indicating that people expect future earnings to fall. 
A) high, perhaps indicating that people expect future earnings to rise. 
B) high, perhaps indicating that people expect future earnings to fall. 
C) low, perhaps indicating that people expect future earnings to rise. 
D) low, perhaps indicating that people expect future earnings to fall.

Question 14

In national income accounting, we use which of the following pairs of terms interchangeably?

Accepted Answer

A) "investment" and "private saving" 
B) "investment" and "purchases of stocks and bonds" 
C) "saving" and "national saving" 
D) "public saving" and "government tax revenue minus government spending" 
A) "investment" and "private saving" 
B) "investment" and "purchases of stocks and bonds" 
C) "saving" and "national saving" 
D) "public saving" and "government tax revenue minus government spending"

Question 15

Suppose that the tires of a certain tire manufacturer are discovered to be defective. Other things the same, this news would cause

Accepted Answer

A) the demand for this company's stock to decrease, so the price would rise. 
B) the demand for this company's stock to decrease, so the price would fall. 
C) the supply of this company's stock to decrease, so the price would fall. 
D) the supply of this company's stock to decrease, so the price would rise. 
A) the demand for this company's stock to decrease, so the price would rise. 
B) the demand for this company's stock to decrease, so the price would fall. 
C) the supply of this company's stock to decrease, so the price would fall. 
D) the supply of this company's stock to decrease, so the price would rise.

Question 16

A bond buyer is a

Accepted Answer

A) saver. Long term bonds have less risk than short term bonds. 
B) saver. Long term bonds have more risk than short term bonds. 
C) borrower. Long term bonds have less risk than short term bonds. 
D) borrower. Long term bonds have more risk than short term bonds. 
A) saver. Long term bonds have less risk than short term bonds. 
B) saver. Long term bonds have more risk than short term bonds. 
C) borrower. Long term bonds have less risk than short term bonds. 
D) borrower. Long term bonds have more risk than short term bonds.

Question 17

Financial markets are important for bringing equilibrium to the loanable funds market, but do not affect the efficient allocation of scarce resources in the long-run.

Accepted Answer

A) True 
 B)False

Question 18

A _____ is a certificate of indebtedness and a _____ is a claim to partial ownership in a firm.

Accepted Answer

The answer of A _____ is a certificate of indebtedness...

Question 19

If there is a shortage of loanable funds, then

Accepted Answer

A) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium. 
A) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.

Question 20

The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called

Accepted Answer

A) credit risk. 
B) interest risk. 
C) term risk. 
D) private risk. 
A) credit risk. 
B) interest risk. 
C) term risk. 
D) private risk.

Exam 26: Saving, Investment, and the Financial System

In the terminology of macroeconomics, what's the difference between a saver and an investor?

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,000, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

Suppose a country has a larger increase in debt in 2014 than it had in 2013. Then other things the same,

​The nominal interest rate increases by 5 percent. What is the effect on investment?

Which of the following would both make the interest rate on a bond higher than otherwise?

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. Which company had the lowest earnings per share?

Atlas Corporation is in sound financial condition. It sells a long-term bond. Which of the following make the interest rate on this bond lower than otherwise?

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

A checking deposit functions as

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

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

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

Alpha Corporation has a price of $5 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio which is

In national income accounting, we use which of the following pairs of terms interchangeably?

Suppose that the tires of a certain tire manufacturer are discovered to be defective. Other things the same, this news would cause

A bond buyer is a

Financial markets are important for bringing equilibrium to the loanable funds market, but do not affect the efficient allocation of scarce resources in the long-run.

A _____ is a certificate of indebtedness and a _____ is a claim to partial ownership in a firm.

If there is a shortage of loanable funds, then

The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

The nominal interest rate increases by 5 percent. What is the effect on investment?

A _ is a certificate of indebtedness and a _ is a claim to partial ownership in a firm.