Question 1

A stock's dividend yield is the

Accepted Answer

A) dividend as a percentage of the price per share. 
B) stock price as a percentage of the dividend. 
C) dividend as a percentage of the retained earnings per share. 
D) retained earnings per share as the percentage of the dividend. 
A) dividend as a percentage of the price per share. 
B) stock price as a percentage of the dividend. 
C) dividend as a percentage of the retained earnings per share. 
D) retained earnings per share as the percentage of the dividend.

Question 2

An increase in the government budget deficit causes national saving to _____, the interest rate to _____, and investment to _____.

Accepted Answer

decrease,

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Which of the following are financial intermediaries?

Accepted Answer

A) both banks and mutual funds 
B) banks but not mutual funds 
C) mutual funds but not banks 
D) neither banks or mutual funds 
A) both banks and mutual funds 
B) banks but not mutual funds 
C) mutual funds but not banks 
D) neither banks or mutual funds

Question 5

National saving

Accepted Answer

A) is the total income in the economy that remains after paying for consumption. 
B) is the total income in the economy that remains after paying for consumption and government purchases. 
C) is always greater than investment for a closed economy. 
D) is equal to private saving minus public saving. 
A) is the total income in the economy that remains after paying for consumption. 
B) is the total income in the economy that remains after paying for consumption and government purchases. 
C) is always greater than investment for a closed economy. 
D) is equal to private saving minus public saving.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Skeptics of government policy to reduce taxes on saving argue that it would primarily benefit the rich.

Accepted Answer

A) True 
 B)False

Question 8

Managed funds

Accepted Answer

A) typically have a higher rate of return and higher costs than index funds. 
B) typically have a higher rate of return and lower costs than index funds. 
C) typically have a lower rate of return and higher costs than index funds. 
D) typically have a lower rate of return and lower costs than index funds. 
A) typically have a higher rate of return and higher costs than index funds. 
B) typically have a higher rate of return and lower costs than index funds. 
C) typically have a lower rate of return and higher costs than index funds. 
D) typically have a lower rate of return and lower costs than index funds.

Question 9

Short-term bonds are generally

Accepted Answer

A) less risky than long-term bonds and so they feature higher interest rates. 
B) less risky than long-term bonds and so they feature lower interest rates. 
C) more risky than long-term bonds and so they feature higher interest rates. 
D) more risky than long-term bonds and so they feature lower interest rates. 
A) less risky than long-term bonds and so they feature higher interest rates. 
B) less risky than long-term bonds and so they feature lower interest rates. 
C) more risky than long-term bonds and so they feature higher interest rates. 
D) more risky than long-term bonds and so they feature lower interest rates.

Question 10

When the government runs a budget deficit,

Accepted Answer

A) interest rates are lower than they would be if the budget were balanced. 
B) national saving is higher than it would be if the budget were balanced. 
C) investment is lower than it would be if the budget were balanced. 
D) All of the above are correct. 
A) interest rates are lower than they would be if the budget were balanced. 
B) national saving is higher than it would be if the budget were balanced. 
C) investment is lower than it would be if the budget were balanced. 
D) All of the above are correct.

Question 11

If there is shortage of loanable funds, then

Accepted Answer

A) the supply for loanable funds shifts right and the demand shifts left. 
B) the supply for loanable funds shifts left and the demand shifts right. 
C) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium. 
A) the supply for loanable funds shifts right and the demand shifts left. 
B) the supply for loanable funds shifts left and the demand shifts right. 
C) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

Question 12

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct?

Accepted Answer

A) Melinda is an investor. 
B) The depositors are investors. 
C) Both Melinda and the depositors are investors. 
D) Neither Melinda nor the depositors are investors. 
A) Melinda is an investor. 
B) The depositors are investors. 
C) Both Melinda and the depositors are investors. 
D) Neither Melinda nor the depositors are investors.

Question 13

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 14

Other things the same, when the interest rate rises,

Accepted Answer

A) people would want to lend more, making the supply of loanable funds increase. 
B) people would want to lend less, making the supply of loanable funds decrease. 
C) people would want to lend more, making the quantity of loanable funds supplied increase. 
D) people would want to lend less, making the quantity of loanable funds supplied decrease. 
A) people would want to lend more, making the supply of loanable funds increase. 
B) people would want to lend less, making the supply of loanable funds decrease. 
C) people would want to lend more, making the quantity of loanable funds supplied increase. 
D) people would want to lend less, making the quantity of loanable funds supplied decrease.

Question 15

If the nominal interest rate is 7 percent and the real interest rate is 2 percent, then what is the inflation rate?

Accepted Answer

A) 9.0 percent 
B) 5 percent 
C) 3.5 percent 
D) None of the above is correct. 
A) 9.0 percent 
B) 5 percent 
C) 3.5 percent 
D) None of the above is correct.

Question 16

If the government reduces transfer payments, what happens to the budget deficit? What curve does this change in the market for loanable funds, which direction does it shift, and what happens to the equilibrium interest rate?

Accepted Answer

A reduction in transfer paymen

Question 17

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Accepted Answer

Robert is

Question 18

You have some estimates of national accounts numbers for a closed economy for the coming year. Under one set of expectations, government purchases will be $30 billion, transfer payments will be $10 billion, and taxes will be $45 billion. Under another set of expectations, GDP will be $200 billion, taxes will be $50 billion, transfer payments will be $20 billion, consumption will be $120 million, and investment will be $40 billion. Based on these numbers in the first case there should be a

Accepted Answer

A) $15 billion surplus, and in the second case a $10 billion surplus. 
B) $15 billion surplus, and in the second case a $30 billion deficit. 
C) $5 billion surplus, and in the second case a $10 billion deficit. 
D) $5 billion surplus, and in the second case a $30 billion deficit. 
A) $15 billion surplus, and in the second case a $10 billion surplus. 
B) $15 billion surplus, and in the second case a $30 billion deficit. 
C) $5 billion surplus, and in the second case a $10 billion deficit. 
D) $5 billion surplus, and in the second case a $30 billion deficit.

Question 19

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves.
r   Q
-Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Accepted Answer

A) The government goes from running a budget deficit to running a budget surplus. 
B) Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories. 
C) A change in the tax laws encourages people to consume less and save more. 
D) A change in the tax laws encourages people to consume more and save less. 
A) The government goes from running a budget deficit to running a budget surplus. 
B) Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories. 
C) A change in the tax laws encourages people to consume less and save more. 
D) A change in the tax laws encourages people to consume more and save less.

Question 20

Which of the following is a financial intermediary?

Accepted Answer

A) a mutual fund 
B) the stock market 
C) a U.S. government bond 
D) a wealthy individual who regularly buys and holds large quantities of government bonds 
A) a mutual fund 
B) the stock market 
C) a U.S. government bond 
D) a wealthy individual who regularly buys and holds large quantities of government bonds

Exam 26: Saving, Investment, and the Financial System

A stock's dividend yield is the

An increase in the government budget deficit causes national saving to _____, the interest rate to _____, and investment to _____.

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

Which of the following are financial intermediaries?

National saving

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

Skeptics of government policy to reduce taxes on saving argue that it would primarily benefit the rich.

Managed funds

Short-term bonds are generally

When the government runs a budget deficit,

If there is shortage of loanable funds, then

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct?

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

Other things the same, when the interest rate rises,

If the nominal interest rate is 7 percent and the real interest rate is 2 percent, then what is the inflation rate?

If the government reduces transfer payments, what happens to the budget deficit? What curve does this change in the market for loanable funds, which direction does it shift, and what happens to the equilibrium interest rate?

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. r Q -Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Which of the following is a financial intermediary?

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

An increase in the government budget deficit causes national saving to ___, the interest rate to _, and investment to ___.