Question 1

The two most important financial markets are the _____ market and the _____ market.

Accepted Answer

bond, stoc

Question 2

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would

Accepted Answer

A) raise both private and public saving. 
B) raise private saving and lower public saving. 
C) lower private saving and raise public saving. 
D) lower private and public saving. 
A) raise both private and public saving. 
B) raise private saving and lower public saving. 
C) lower private saving and raise public saving. 
D) lower private and public saving.

Question 3

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the price-earnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Accepted Answer

A) $15.6 million. 
B) $250 million. 
C) $160 million. 
D) $625 million. 
A) $15.6 million. 
B) $250 million. 
C) $160 million. 
D) $625 million.

Question 4

Which government policy raises the interest rate and raises investment spending?

Accepted Answer

An investm

Question 5

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories are sold. What type of risk for bondholders falls? What happens to the interest rate on this company's bonds?

Accepted Answer

default ri

Question 6

Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds?

Accepted Answer

A) The demand for loanable funds shifted rightward. 
B) The demand for loanable funds shifted leftward. 
C) The supply of loanable funds shifted rightward. 
D) The supply of loanable funds shifted leftward. 
A) The demand for loanable funds shifted rightward. 
B) The demand for loanable funds shifted leftward. 
C) The supply of loanable funds shifted rightward. 
D) The supply of loanable funds shifted leftward.

Question 7

Lenders sell bonds and borrowers buy them.

Accepted Answer

A) True 
 B)False

Question 8

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Accepted Answer

A) Private saving is equal to government expenditures. 
B) Public saving is equal to investment. 
C) After paying their taxes and paying for their consumption, households have nothing left. 
D) The government's tax revenue is equal to its expenditures. 
A) Private saving is equal to government expenditures. 
B) Public saving is equal to investment. 
C) After paying their taxes and paying for their consumption, households have nothing left. 
D) The government's tax revenue is equal to its expenditures.

Question 9

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

Accepted Answer

A) True 
 B)False

Question 10

All else equal, when people become more optimistic about a company's future, the

Accepted Answer

A) supply of the stock and the price will both rise. 
B) supply of the stock and the price will both fall. 
C) demand for the stock and the price will both rise. 
D) demand for the stock and the price will both fall. 
A) supply of the stock and the price will both rise. 
B) supply of the stock and the price will both fall. 
C) demand for the stock and the price will both rise. 
D) demand for the stock and the price will both fall.

Question 11

Scenario 26-2. Assume the following information for an imaginary, closed economy.
GDP = $5 trillion; consumption = $3.1 trillion;
government purchases = $0.7 trillion; and taxes = $0.9 trillion.
-Refer to Scenario 26-2. For this economy, public saving is equal to

Accepted Answer

A) $0.2 trillion and the government is running a budget surplus of $0.2 trillion. 
B) $0.2 trillion and the government is running a budget deficit of $0.2 trillion. 
C) -$0.2 trillion and the government is running a budget deficit of $0.2 trillion. 
D) -$0.2 trillion and the government is running a budget surplus of $0.2 trillion. 
A) $0.2 trillion and the government is running a budget surplus of $0.2 trillion. 
B) $0.2 trillion and the government is running a budget deficit of $0.2 trillion. 
C) -$0.2 trillion and the government is running a budget deficit of $0.2 trillion. 
D) -$0.2 trillion and the government is running a budget surplus of $0.2 trillion.

Question 12

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Accepted Answer

The supply of loanab

Question 13

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

Accepted Answer

The supply of loanable funds w

Question 14

If national saving in a closed economy is greater than zero, which of the following must be true?

Accepted Answer

A) Either public saving or private saving must be greater than zero. 
B) Investment is positive. 
C)    
D) All of the above are correct. 
A) Either public saving or private saving must be greater than zero. 
B) Investment is positive. 
C)    
D) All of the above are correct.

Question 15

If there is a shortage in the market for loanable funds, what happens to desired saving and desired investment as the interest rate moves to its equilibrium value?

Accepted Answer

A) desired saving and desired investment both fall 
B) desired saving and desired investment both rise 
C) desired saving falls and desired investment rises 
D) desired saving rises and desired investment falls 
A) desired saving and desired investment both fall 
B) desired saving and desired investment both rise 
C) desired saving falls and desired investment rises 
D) desired saving rises and desired investment falls

Question 16

When someone borrows to purchase capital goods, he is using someone else's _____ to fund his _____.

Accepted Answer

The answer of When someone borrows to purchase capital goods,...

Question 17

An increase in the quantity of loanable funds traded means that

Accepted Answer

A) firms are borrowing less and investment decreases. 
B) firms are borrowing less and investment increases. 
C) firms are borrowing more and investment increases. 
D) firms are borrowing more and investment decreases. 
A) firms are borrowing less and investment decreases. 
B) firms are borrowing less and investment increases. 
C) firms are borrowing more and investment increases. 
D) firms are borrowing more and investment decreases.

Question 18

Which of the following statements is correct?

Accepted Answer

A) NASDAQ is an important stock exchange in the United States. 
B) The demand for a corporation's stock is largely based on people's perception of the corporation's profitability in the future. 
C) Compared to the Standard & Poor's 500 Index, the Dow Jones Industrial Average incorporates the stock prices of a much smaller number of corporations. 
D) All of the above are correct. 
A) NASDAQ is an important stock exchange in the United States. 
B) The demand for a corporation's stock is largely based on people's perception of the corporation's profitability in the future. 
C) Compared to the Standard & Poor's 500 Index, the Dow Jones Industrial Average incorporates the stock prices of a much smaller number of corporations. 
D) All of the above are correct.

Question 19

Suppose the economy is closed and consumption is 8 million, taxes are 2 million, and government purchases are 1.75 million. If national saving amounts to 1.25 million, then what is GDP?

Accepted Answer

A) 9 million. 
B) 9.5 million. 
C) 13 million. 
D) 11 million. 
A) 9 million. 
B) 9.5 million. 
C) 13 million. 
D) 11 million.

Question 20

Other things the same, as the maturity of a bond becomes longer, the bond will pay

Accepted Answer

A) a lower interest rate because it has less risk. 
B) a lower interest rate because it has more risk. 
C) a higher interest rate because it has more risk. 
D) the same interest rate, because there is no relationship between term and risk. 
A) a lower interest rate because it has less risk. 
B) a lower interest rate because it has more risk. 
C) a higher interest rate because it has more risk. 
D) the same interest rate, because there is no relationship between term and risk.

Exam 26: Saving, Investment, and the Financial System

The two most important financial markets are the _____ market and the _____ market.

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the price-earnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Which government policy raises the interest rate and raises investment spending?

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories are sold. What type of risk for bondholders falls? What happens to the interest rate on this company's bonds?

Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds?

Lenders sell bonds and borrowers buy them.

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

All else equal, when people become more optimistic about a company's future, the

Scenario 26-2. Assume the following information for an imaginary, closed economy. GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion. -Refer to Scenario 26-2. For this economy, public saving is equal to

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

If national saving in a closed economy is greater than zero, which of the following must be true?

If there is a shortage in the market for loanable funds, what happens to desired saving and desired investment as the interest rate moves to its equilibrium value?

When someone borrows to purchase capital goods, he is using someone else's _____ to fund his _____.

An increase in the quantity of loanable funds traded means that

Which of the following statements is correct?

Suppose the economy is closed and consumption is 8 million, taxes are 2 million, and government purchases are 1.75 million. If national saving amounts to 1.25 million, then what is GDP?

Other things the same, as the maturity of a bond becomes longer, the bond will pay

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 two most important financial markets are the _ market and the _ market.

When someone borrows to purchase capital goods, he is using someone else's _ to fund his _.