Question 1

Which of the following is both a store of value and a common medium of exchange?

Accepted Answer

A)  corporate bonds 
B)  mutual funds 
C)  chequing account balances 
D)  a pension plan 
A)  corporate bonds 
B)  mutual funds 
C)  chequing account balances 
D)  a pension plan

Question 2

Suppose that in a closed economy GDP is equal to 12,000, taxes are equal to 1500, consumption is equal to 6800, and government expenditures are equal to 3200. What is national saving?

Accepted Answer

A)  500 
B)  2000 
C)  2700 
D)  4200 
A)  500 
B)  2000 
C)  2700 
D)  4200

Question 3

Which of the following best describes the evolution of Canadian national debt between 1996 and 2011?

Accepted Answer

A)  It fell by 10 percent of GDP. 
B)  It fell, and then it rose. 
C)  It fell by $60 billion. 
D)  It fell by 36 percent of GDP. 
A)  It fell by 10 percent of GDP. 
B)  It fell, and then it rose. 
C)  It fell by $60 billion. 
D)  It fell by 36 percent of GDP.

Question 4

The Eye of Horus Incense Company has $10 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. How does this fact influence the company's decision?

Accepted Answer

A)  The increase in the rate of interest should not influence the decision to build the factory because the Eye of Horus doesn't have to borrow any money. 
B)  The increase in the rate of interest should not influence the decision to build the factory because its shareholders are expecting a new factory. 
C)  The increase in the rate of interest should make it more likely that the Eye of Horus will build the factory because a higher interest rate will make the factory more valuable. 
D)  The increase in the rate of interest should make it less likely that the Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher. 
A)  The increase in the rate of interest should not influence the decision to build the factory because the Eye of Horus doesn't have to borrow any money. 
B)  The increase in the rate of interest should not influence the decision to build the factory because its shareholders are expecting a new factory. 
C)  The increase in the rate of interest should make it more likely that the Eye of Horus will build the factory because a higher interest rate will make the factory more valuable. 
D)  The increase in the rate of interest should make it less likely that the Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher.

Question 5

Table 8-2
The following table shows stock prices and volumes for a few hypothetical companies.
 
-Refer to Table 8-2. Which company had the lowest earnings per share?

Accepted Answer

A)  P 
B)  Q 
C)  R 
D)  S 
A)  P 
B)  Q 
C)  R 
D)  S

Question 6

Which bond would you expect to pay the highest interest rate?

Accepted Answer

A)  a bond issued by the federal government 
B)  a bond issued by CN Railway 
C)  a bond issued by Manitoba 
D)  a bond issued by a new clothing chain 
A)  a bond issued by the federal government 
B)  a bond issued by CN Railway 
C)  a bond issued by Manitoba 
D)  a bond issued by a new clothing chain

Question 7

Compared to bonds, what does stock offer the holder?

Accepted Answer

A)  lower risk 
B)  partial ownership 
C)  lower return 
D)  higher return 
A)  lower risk 
B)  partial ownership 
C)  lower return 
D)  higher return

Question 8

What is the single most important piece of information about a stock?

Accepted Answer

A)  price/earnings ratio 
B)  dividend 
C)  volume 
D)  price 
A)  price/earnings ratio 
B)  dividend 
C)  volume 
D)  price

Question 9

In a closed economy, how does national saving compare with investment?

Accepted Answer

A)  National saving is usually greater than investment. 
B)  National saving is equal to investment. 
C)  National saving is usually less than investment because of the leakage of taxes. 
D)  National saving is usually less than investment. 
A)  National saving is usually greater than investment. 
B)  National saving is equal to investment. 
C)  National saving is usually less than investment because of the leakage of taxes. 
D)  National saving is usually less than investment.

Question 10

In 1995, MP Bill Gatt proposed that the income tax be replaced with a consumption tax. If his program had been passed, how would the equilibrium interest rate and the quantity of loanable funds have been affected?

Accepted Answer

A)  The equilibrium interest rate and quantity of loanable funds would be lower. 
B)  The equilibrium interest rate and quantity of loanable funds would be higher. 
C)  The equilibrium interest rate would be higher, and the equilibrium quantity of loanable funds would be lower. 
D)  The equilibrium interest rate would be lower, and the equilibrium quantity of loanable funds would be higher. 
A)  The equilibrium interest rate and quantity of loanable funds would be lower. 
B)  The equilibrium interest rate and quantity of loanable funds would be higher. 
C)  The equilibrium interest rate would be higher, and the equilibrium quantity of loanable funds would be lower. 
D)  The equilibrium interest rate would be lower, and the equilibrium quantity of loanable funds would be higher.

Question 11

Which statement best defines financial intermediaries?

Accepted Answer

A)  They are the same as financial markets. 
B)  They are individuals who make a profit by buying a stock low and selling it high. 
C)  They are a more general name for financial assets, such as stocks, bonds, and chequing accounts. 
D)  They are financial institutions through which savers can indirectly provide funds to borrowers. 
A)  They are the same as financial markets. 
B)  They are individuals who make a profit by buying a stock low and selling it high. 
C)  They are a more general name for financial assets, such as stocks, bonds, and chequing accounts. 
D)  They are financial institutions through which savers can indirectly provide funds to borrowers.

Question 12

The only province not currently collecting a sales tax is Alberta. What is a likely result from the recently elected government's proposal to reduce income taxes and introduce a sales tax?

Accepted Answer

A)  The equilibrium interest rate and investment would both increase. 
B)  The supply of loanable funds would shift left 
C)  The standard of living would eventually rise. 
D)  The equilibrium interest rate would decrease and investment would increase. 
A)  The equilibrium interest rate and investment would both increase. 
B)  The supply of loanable funds would shift left 
C)  The standard of living would eventually rise. 
D)  The equilibrium interest rate would decrease and investment would increase.

Question 13

In the small closed economy of San Lucretia, the currency is the denar. Statistics for last year show that private saving was 60 billion denars, taxes were 70 billion denars, government purchases of goods and services were 60 billion denars, there were no transfer payments by the government, and GDP was 400 billion denars. What was investment in San Lucretia?

Accepted Answer

A)  50 billion denars 
B)  60 billion denars 
C)  70 billion denars 
D)  80 billion denars 
A)  50 billion denars 
B)  60 billion denars 
C)  70 billion denars 
D)  80 billion denars

Question 14

The sale of stocks or bonds to raise money is known as equity finance.

Accepted Answer

A) True 
 B)False

Question 15

When is a budget surplus created?

Accepted Answer

A)  when the government sells more bonds than it buys back 
B)  when the government spends more than it receives in tax revenue 
C)  when private savings are greater than zero 
D)  when the government spends less than the tax revenue 
A)  when the government sells more bonds than it buys back 
B)  when the government spends more than it receives in tax revenue 
C)  when private savings are greater than zero 
D)  when the government spends less than the tax revenue

Question 16

What is a dividend yield?

Accepted Answer

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

Question 17

What do people who buy newly issued stock in a corporation such as Rockwood Pottery Ltd. provide?

Accepted Answer

A)  They buy debt finance and so become part owners of Rockwood. 
B)  They buy debt finance and so become creditors of Rockwood. 
C)  They buy equity finance and so become part owners of Rockwood. 
D)  They buy equity finance and so become creditors of Rockwood. 
A)  They buy debt finance and so become part owners of Rockwood. 
B)  They buy debt finance and so become creditors of Rockwood. 
C)  They buy equity finance and so become part owners of Rockwood. 
D)  They buy equity finance and so become creditors of Rockwood.

Question 18

Which term refers to the sale of stocks and bonds to raise money?

Accepted Answer

A)  debt finance 
B)  debt-equity finance 
C)  debt finance for stocks, and equity finance for bonds 
D)  equity finance for stocks, and debt finance for bonds 
A)  debt finance 
B)  debt-equity finance 
C)  debt finance for stocks, and equity finance for bonds 
D)  equity finance for stocks, and debt finance for bonds

Question 19

A decrease in taxes on interest income would increase the interest rate.

Accepted Answer

A) True 
 B)False

Question 20

Mutual funds are a type of financial intermediary.

Accepted Answer

A) True 
 B)False

Which of the following is both a store of value and a common medium of exchange?

Suppose that in a closed economy GDP is equal to 12,000, taxes are equal to 1500, consumption is equal to 6800, and government expenditures are equal to 3200. What is national saving?

Which of the following best describes the evolution of Canadian national debt between 1996 and 2011?

The Eye of Horus Incense Company has $10 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. How does this fact influence the company's decision?

Table 8-2 The following table shows stock prices and volumes for a few hypothetical companies. -Refer to Table 8-2. Which company had the lowest earnings per share?

Which bond would you expect to pay the highest interest rate?

Compared to bonds, what does stock offer the holder?

What is the single most important piece of information about a stock?

In a closed economy, how does national saving compare with investment?

In 1995, MP Bill Gatt proposed that the income tax be replaced with a consumption tax. If his program had been passed, how would the equilibrium interest rate and the quantity of loanable funds have been affected?

Which statement best defines financial intermediaries?

The only province not currently collecting a sales tax is Alberta. What is a likely result from the recently elected government's proposal to reduce income taxes and introduce a sales tax?

The sale of stocks or bonds to raise money is known as equity finance.

When is a budget surplus created?

What is a dividend yield?

What do people who buy newly issued stock in a corporation such as Rockwood Pottery Ltd. provide?

Which term refers to the sale of stocks and bonds to raise money?

A decrease in taxes on interest income would increase the interest rate.

Mutual funds are a type of financial intermediary.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small 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

Five Debates Over Macroeconomic Policy

Filters

Exam 8: Saving, Investment, and the Financial System

Which of the following is both a store of value and a common medium of exchange?

Suppose that in a closed economy GDP is equal to 12,000, taxes are equal to 1500, consumption is equal to 6800, and government expenditures are equal to 3200. What is national saving?

Which of the following best describes the evolution of Canadian national debt between 1996 and 2011?

The Eye of Horus Incense Company has $10 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. How does this fact influence the company's decision?

Table 8-2 The following table shows stock prices and volumes for a few hypothetical companies. -Refer to Table 8-2. Which company had the lowest earnings per share?

Which bond would you expect to pay the highest interest rate?

Compared to bonds, what does stock offer the holder?

What is the single most important piece of information about a stock?

In a closed economy, how does national saving compare with investment?

In 1995, MP Bill Gatt proposed that the income tax be replaced with a consumption tax. If his program had been passed, how would the equilibrium interest rate and the quantity of loanable funds have been affected?

Which statement best defines financial intermediaries?

The only province not currently collecting a sales tax is Alberta. What is a likely result from the recently elected government's proposal to reduce income taxes and introduce a sales tax?

The sale of stocks or bonds to raise money is known as equity finance.

When is a budget surplus created?

What is a dividend yield?

What do people who buy newly issued stock in a corporation such as Rockwood Pottery Ltd. provide?

Which term refers to the sale of stocks and bonds to raise money?

A decrease in taxes on interest income would increase the interest rate.

Mutual funds are a type of financial intermediary.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small 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

Five Debates Over Macroeconomic Policy

Filters