Question 1

Y = C + I + G + NX is an identity because

Accepted Answer

A) each symbol identifies a macroeconomic variable. 
B) the right-hand and left-hand sides are equal when an equilibrium is reached. 
C) the equality holds due to the way the variables are defined. 
D) None of the above is correct. 
A) each symbol identifies a macroeconomic variable. 
B) the right-hand and left-hand sides are equal when an equilibrium is reached. 
C) the equality holds due to the way the variables are defined. 
D) None of the above is correct.

Question 2

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Accepted Answer

A) True 
 B)False

Question 3

Anything other than a change in the interest rate that decreases national saving shifts the supply of loanable funds to the left.

Accepted Answer

A) True 
 B)False

Question 4

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Accepted Answer

A) Bond A was issued by a financially weak corporation and Bond B was issued by a financially strong corporation. 
B) Bond A was issued by the Exxon Mobil Corporation and Bond B was issued by the state of New York. 
C) Bond A has a term of 20 years and Bond B has a term of 1 year. 
D) All of the above are correct. 
A) Bond A was issued by a financially weak corporation and Bond B was issued by a financially strong corporation. 
B) Bond A was issued by the Exxon Mobil Corporation and Bond B was issued by the state of New York. 
C) Bond A has a term of 20 years and Bond B has a term of 1 year. 
D) All of the above are correct.

Question 5

What is a bond buyer promised when she buys a bond?

Accepted Answer

The answer of What is a bond buyer promised when...

Question 6

The dividend yield is

Accepted Answer

A) ​a financial intermediary. 
B) ​reported as a percentage of the stock's price. 
C) ​the same as retained earnings. 
D) ​a function of the company's earnings per share and the stock's price. 
A) ​a financial intermediary. 
B) ​reported as a percentage of the stock's price. 
C) ​the same as retained earnings. 
D) ​a function of the company's earnings per share and the stock's price.

Question 7

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

Accepted Answer

A) 3.5 percent. 
B) 5 percent. 
C) 9 percent 
D) 7 percent. 
A) 3.5 percent. 
B) 5 percent. 
C) 9 percent 
D) 7 percent.

Question 8

Kathleen is considering expanding her dress shop. If interest rates rise she is

Accepted Answer

A) less likely to expand. This illustrates why the supply of loanable funds slopes downward. 
B) more likely to expand. This illustrates why the supply of loanable funds slopes upward. 
C) less likely to expand. This illustrates why the demand for loanable funds slopes downward. 
D) more likely to expand. This illustrates why the demand for loanable funds slopes upward. 
A) less likely to expand. This illustrates why the supply of loanable funds slopes downward. 
B) more likely to expand. This illustrates why the supply of loanable funds slopes upward. 
C) less likely to expand. This illustrates why the demand for loanable funds slopes downward. 
D) more likely to expand. This illustrates why the demand for loanable funds slopes upward.

Question 9

When tax code changes reduce investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment.

Accepted Answer

demand, le

Question 10

Which of the following statements is correct?

Accepted Answer

A) A large, well-known corporation such as Intel generally would use financial intermediation to finance expansion of its facilities. 
B) On average, managed funds outperform indexed funds. 
C) Unlike corporate bonds and stocks, checking accounts are a medium of exchange. 
D) A mutual fund is a financial market. 
A) A large, well-known corporation such as Intel generally would use financial intermediation to finance expansion of its facilities. 
B) On average, managed funds outperform indexed funds. 
C) Unlike corporate bonds and stocks, checking accounts are a medium of exchange. 
D) A mutual fund is a financial market.

Question 11

Which of the following statements about mutual funds is correct?

Accepted Answer

A) A mutual fund is a financial intermediary. 
B) A mutual fund acquires its funds primarily by selling shares to the public. 
C) People who buy shares from a mutual fund accept all of the risk and return associated with the mutual fund's portfolio. 
D) All of the above are correct. 
A) A mutual fund is a financial intermediary. 
B) A mutual fund acquires its funds primarily by selling shares to the public. 
C) People who buy shares from a mutual fund accept all of the risk and return associated with the mutual fund's portfolio. 
D) All of the above are correct.

Question 12

If Canada goes from a large budget deficit to a small budget deficit, it will

Accepted Answer

A) increase private saving and so shift the supply of loanable funds right. 
B) increase investment and so shift the demand for loanable funds right. 
C) increase public saving and so shift the supply of loanable funds right. 
D) reduce national saving and shift the supply left. 
A) increase private saving and so shift the supply of loanable funds right. 
B) increase investment and so shift the demand for loanable funds right. 
C) increase public saving and so shift the supply of loanable funds right. 
D) reduce national saving and shift the supply left.

Question 13

In macroeconomics, _____ refers to the purchase of new capital.

Accepted Answer

The answer of In macroeconomics, _____ refers to the purchase...

Question 14

A U.S. Treasury bond is a

Accepted Answer

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

Question 15

If the government currently has a budget deficit, then

Accepted Answer

A) it does not necessarily have a debt. 
B) its debt is increasing. 
C) government expenditures are greater than taxes. 
D) All of the above are correct. 
A) it does not necessarily have a debt. 
B) its debt is increasing. 
C) government expenditures are greater than taxes. 
D) All of the above are correct.

Question 16

Mutual funds

Accepted Answer

A) provide diversification. Shareholders assume all of the risk associated with the mutual fund. 
B) provide diversification. Government insurance eliminates the risk of mutual fund shareholders. 
C) do not provide diversification. Shareholders assume all of the risk associated with the mutual fund 
D) do not provide diversification. Government insurance eliminates the risk of mutual fund shareholders. 
A) provide diversification. Shareholders assume all of the risk associated with the mutual fund. 
B) provide diversification. Government insurance eliminates the risk of mutual fund shareholders. 
C) do not provide diversification. Shareholders assume all of the risk associated with the mutual fund 
D) do not provide diversification. Government insurance eliminates the risk of mutual fund shareholders.

Question 17

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, national saving is equal to

Accepted Answer

A) $1.1 trillion. 
B) $2.9 trillion. 
C) $1.2 trillion. 
D) $1.7 trillion. 
A) $1.1 trillion. 
B) $2.9 trillion. 
C) $1.2 trillion. 
D) $1.7 trillion.

Question 18

The majority of economists believe that policies that reduce the saving rate will reduce long-run living standards.

Accepted Answer

A) True 
 B)False

Question 19

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

Accepted Answer

A) corporate bond, municipal bond, U.S. government bond 
B) corporate bond, U.S. government bond, municipal bond 
C) municipal bond, U.S. government bond, corporate bond 
D) U.S. government bond, municipal bond, corporate bond 
A) corporate bond, municipal bond, U.S. government bond 
B) corporate bond, U.S. government bond, municipal bond 
C) municipal bond, U.S. government bond, corporate bond 
D) U.S. government bond, municipal bond, corporate bond

Question 20

You are thinking of buying a bond from Bluestone Corporation. You know that this bond is long term and you know that Bluestone's business ventures are risky and uncertain. You then consider another bond with a shorter term to maturity issued by a company with good prospects and an established reputation. Which of the following is correct?

Accepted Answer

A) The longer term would tend to make the interest rate on the bond issued by Bluestone higher, while the higher risk would tend to make the interest rate lower. 
B) The longer term would tend to make the interest rate on the bond issued by Bluestone lower, while the higher risk would tend to make the interest rate higher. 
C) Both the longer term and the higher risk would tend to make the interest rate lower on the bond issued by Bluestone. 
D) Both the longer term and the higher risk would tend to make the interest rate higher on the bond issued by Bluestone. 
A) The longer term would tend to make the interest rate on the bond issued by Bluestone higher, while the higher risk would tend to make the interest rate lower. 
B) The longer term would tend to make the interest rate on the bond issued by Bluestone lower, while the higher risk would tend to make the interest rate higher. 
C) Both the longer term and the higher risk would tend to make the interest rate lower on the bond issued by Bluestone. 
D) Both the longer term and the higher risk would tend to make the interest rate higher on the bond issued by Bluestone.

Exam 26: Saving, Investment, and the Financial System

Y = C + I + G + NX is an identity because

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Anything other than a change in the interest rate that decreases national saving shifts the supply of loanable funds to the left.

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

What is a bond buyer promised when she buys a bond?

The dividend yield is

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

Kathleen is considering expanding her dress shop. If interest rates rise she is

When tax code changes reduce investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment.

Which of the following statements is correct?

Which of the following statements about mutual funds is correct?

If Canada goes from a large budget deficit to a small budget deficit, it will

In macroeconomics, _____ refers to the purchase of new capital.

A U.S. Treasury bond is a

If the government currently has a budget deficit, then

Mutual funds

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, national saving is equal to

The majority of economists believe that policies that reduce the saving rate will reduce long-run living standards.

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

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

When tax code changes reduce investment incentives, the ___ for loanable funds curve shifts to the _. This results in a(n) _ in the interest rate and a(n) ___ in investment.