Exam 8: Saving, Investment, and the Financial System

Australia has recently implemented a national sales tax. If that country uses the proceeds from this tax to reduce income tax rates, what happens in the loanable funds market

Table 8-1 The following table shows stock prices and volumes for a few hypothetical companies. -Refer to Table 8-1. What were company D's earnings per share?

Which statement best defines a closed economy?

Recently, the Canadian government has gone from a surplus to a deficit. Assuming other things remain the same, what does this change mean?

Buskins Corporation has issued 2 million shares. Its earnings were $10 million of which it retained $4 million. What was the dividend per share?

What has the typical price/earnings ratio been historically?

In a closed economy GDP = $1300, private saving = $125, government budget deficit = $5, and government spending =$15 (all numbers are in billions). Calculate national saving, taxes, and consumption.

If the inflation rate is 3 percent and the real interest rate is 4 percent, what is the nominal interest rate?

Which term refers to the profits paid out to shareholders?

Suppose that Parliament were to repeal an investment tax credit. What would most likely happen in the market for loanable funds?

Which equation will always represent GDP in an open economy?

In a closed economy, what is private saving?

Suppose Microsoft sells a bond. What is the company doing?

Who purchased the correct asset to meet their objective?

When a corporation experiences financial problems, bondholders are paid before shareholders.

The country of Hykania does not trade with any other country. Its GDP is $20 billion. Its government purchases $3 billion worth of goods and services each year, collects $3 billion in taxes, and provides $1 billion in transfer payments to households. Private saving in Hyrkania is $4 billion. What is investment in Hyrkania?

What are the basic differences between bonds and stocks

The country of Aquilonia does not trade with any other country. Its GDP is $30 billion. Its government purchases $5 billion worth of goods and services each year, collects $7 billion in taxes, and provides $3 billion in transfer payments to households. Private saving in Aquilonia is $5 billion. What is consumption?

Which list of bonds is ordered from the most interest to the least interest?

Suppose the following equations give the demand and supply for loanable funds in billions of dollars; r is the real interest rate in percentage points (e.g., if the interest rate is 5 percent, r = 5): QD = 160 - 10r QS = -20 + 20r a) Calculate the equilibrium savings, investment, and interest rate. b) How much is the total amount received by lenders in interest c) Calculate the gains to lenders from financial transactions (producer surplus). d) Calculate the gains to borrowers (the equivalent of consumer surplus).