Question 1

Public saving is equal to national saving minus private saving.

Accepted Answer

A) True 
 B)False

Question 2

If the current market interest rate for loanable funds is below the equilibrium level, what would we expect to happen?

Accepted Answer

A)  Because there is a surplus of loanable funds, the interest rate will rise. 
B)  Because there is a shortage of loanable funds, the interest rate will rise. 
C)  Because there is a shortage of loanable funds, the interest rate will fall. 
D)  Because there is a surplus of loanable funds, the interest rate will fall. 
A)  Because there is a surplus of loanable funds, the interest rate will rise. 
B)  Because there is a shortage of loanable funds, the interest rate will rise. 
C)  Because there is a shortage of loanable funds, the interest rate will fall. 
D)  Because there is a surplus of loanable funds, the interest rate will fall.

Question 3

National saving is equal to Y - T - C.

Accepted Answer

A) True 
 B)False

Question 4

What is most likely to happen if Canada increases its budget deficit?

Accepted Answer

A)  Private saving will decrease and so shift the supply of loanable funds left. 
B)  Investment will decrease and so shift the demand for loanable funds left. 
C)  Public saving will decrease and so shift the supply of loanable funds left. 
D)  Private saving will increase and so shift the supply of loanable funds to the right. 
A)  Private saving will decrease and so shift the supply of loanable funds left. 
B)  Investment will decrease and so shift the demand for loanable funds left. 
C)  Public saving will decrease and so shift the supply of loanable funds left. 
D)  Private saving will increase and so shift the supply of loanable funds to the right.

Question 5

What is the face value of a bond?

Accepted Answer

A)  the market price of the bond 
B)  the difference between the amount owned by the issuer and the market price of the bond 
C)  the amount owed by the issuer 
D)  the interest earned by the owner of the bond 
A)  the market price of the bond 
B)  the difference between the amount owned by the issuer and the market price of the bond 
C)  the amount owed by the issuer 
D)  the interest earned by the owner of the bond

Question 6

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

Accepted Answer

A)  The demand for and supply for loanable funds would shift left. 
B)  The demand for and supply of loanable funds would shift left. 
C)  The demand for loanable funds would shift right. 
D)  The supply of loanable funds would shift right. 
A)  The demand for and supply for loanable funds would shift left. 
B)  The demand for and supply of loanable funds would shift left. 
C)  The demand for loanable funds would shift right. 
D)  The supply of loanable funds would shift right.

Question 7

Which expression represents national saving in a closed economy?

Accepted Answer

A)  Y - I - G - NX 
B)  Y - C - G 
C)  Y - I - C 
D)  G + C - Y 
A)  Y - I - G - NX 
B)  Y - C - G 
C)  Y - I - C 
D)  G + C - Y

Question 8

PacknCamp Corporation has a price of $40, has issued 2 million shares, has increased its cumulated retained earnings by $2 million, and has a dividend yield of 2 percent. What is the price/earnings ratio of PacknCamp?

Accepted Answer

A)  40, which is high compared to historical standards of the market 
B)  40, which is low compared to historical standards of the market 
C)  20, which is low compared to historical standards of the market 
D)  20, which is high compared to historical standards of the market 
A)  40, which is high compared to historical standards of the market 
B)  40, which is low compared to historical standards of the market 
C)  20, which is low compared to historical standards of the market 
D)  20, which is high compared to historical standards of the market

Question 9

Suppose that consumption is 7500, taxes are 1800, and government expenditures are 1500. If national saving is 1500 and the economy is closed, what is the GDP?

Accepted Answer

A)  9500 
B)  10,000 
C)  10,500 
D)  11,200 
A)  9500 
B)  10,000 
C)  10,500 
D)  11,200

Question 10

How does the risk of long-term bonds compare with short-term bonds?

Accepted Answer

A)  Long-term bonds are generally less risky than short-term bonds and so pay higher interest. 
B)  Long-term bonds are generally less risky than short-term bonds and so pay lower interest. 
C)  Long-term bonds are generally more risky than short-term bonds and so pay higher interest. 
D)  Long-term bonds are generally more risky than short-term bonds and so pay lower interest. 
A)  Long-term bonds are generally less risky than short-term bonds and so pay higher interest. 
B)  Long-term bonds are generally less risky than short-term bonds and so pay lower interest. 
C)  Long-term bonds are generally more risky than short-term bonds and so pay higher interest. 
D)  Long-term bonds are generally more risky than short-term bonds and so pay lower interest.

Question 11

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Accepted Answer

A) True 
 B)False

Question 12

Lenders sell bonds, and borrowers buy them.

Accepted Answer

A) True 
 B)False

Question 13

Suppose Parliament instituted an investment tax credit. What would most likely happen in the market for loanable funds?

Accepted Answer

A)  The interest rate and investment would both fall. 
B)  The interest rate and investment would both rise. 
C)  The interest rate would rise, and investment would fall. 
D)  The interest rate would fall, and investment would rise. 
A)  The interest rate and investment would both fall. 
B)  The interest rate and investment would both rise. 
C)  The interest rate would rise, and investment would fall. 
D)  The interest rate would fall, and investment would rise.

Question 14

Suppose a country repeals its investment tax credit. What is most likely to happen in the market for loanable funds?

Accepted Answer

A)  The demand for and the supply of loanable funds would shift to the right. 
B)  The demand for and the supply of loanable funds would shift to the left. 
C)  The supply of loanable funds would shift to the right, and the demand for loanable funds would shift to the left. 
D)  The supply of loanable funds would remain unchanged, and the demand for loanable funds would shift to the left. 
A)  The demand for and the supply of loanable funds would shift to the right. 
B)  The demand for and the supply of loanable funds would shift to the left. 
C)  The supply of loanable funds would shift to the right, and the demand for loanable funds would shift to the left. 
D)  The supply of loanable funds would remain unchanged, and the demand for loanable funds would shift to the left.

Question 15

Corporations receive no proceeds from the resale of their stock.

Accepted Answer

A) True 
 B)False

Question 16

What does a high price/earnings ratio indicate?

Accepted Answer

A)  Either the stock is undervalued or people have become more optimistic about the corporation's prospects. 
B)  Either the stock is overvalued or people have become more optimistic about the corporation's prospects. 
C)  Either the stock is overvalued or people have become less optimistic about the corporation's prospects. 
D)  Either the stock is undervalued or people have become less optimistic about the corporation's prospects. 
A)  Either the stock is undervalued or people have become more optimistic about the corporation's prospects. 
B)  Either the stock is overvalued or people have become more optimistic about the corporation's prospects. 
C)  Either the stock is overvalued or people have become less optimistic about the corporation's prospects. 
D)  Either the stock is undervalued or people have become less optimistic about the corporation's prospects.

Question 17

Which statement best explains why the debt-to-GDP ratio is important?

Accepted Answer

A)  If GDP is rising slower than debt, the government is, in some sense, living within its means. 
B)  A declining debt-to-GDP ratio raises concerns about a country's financial difficulties. 
C)  It is a better measure than the level of debt because it takes into account a country's political stability. 
D)  It allows international comparisons of how indebted countries are. 
A)  If GDP is rising slower than debt, the government is, in some sense, living within its means. 
B)  A declining debt-to-GDP ratio raises concerns about a country's financial difficulties. 
C)  It is a better measure than the level of debt because it takes into account a country's political stability. 
D)  It allows international comparisons of how indebted countries are.

Question 18

What is a characteristic of the bond market?

Accepted Answer

A)  Some bonds have terms as short as a few months. 
B)  Because they are risky, bonds pay a low rate of interest. 
C)  Corporations buy bonds to raise funds. 
D)  Bonds are rarely used as financial instruments. 
A)  Some bonds have terms as short as a few months. 
B)  Because they are risky, bonds pay a low rate of interest. 
C)  Corporations buy bonds to raise funds. 
D)  Bonds are rarely used as financial instruments.

Question 19

Mount Adams Jazz Corporation has a price of $50, a dividend of $0.50, and retained earnings of $1.00 per share. What is the dividend yield on this stock?

Accepted Answer

A)  0.5 percent 
B)  1 percent. 
C)  1 percent 
D)  3.2 percent 
A)  0.5 percent 
B)  1 percent. 
C)  1 percent 
D)  3.2 percent

Question 20

Suppose that in a closed economy GDP is 10,000, consumption is 6500, and taxes are 2000. What value of government expenditures would make national saving equal 1500?

Accepted Answer

A)  2000 
B)  3000 
C)  7000 
D)  9000 
A)  2000 
B)  3000 
C)  7000 
D)  9000

Public saving is equal to national saving minus private saving.

If the current market interest rate for loanable funds is below the equilibrium level, what would we expect to happen?

National saving is equal to Y - T - C.

What is most likely to happen if Canada increases its budget deficit?

What is the face value of a bond?

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

Which expression represents national saving in a closed economy?

PacknCamp Corporation has a price of $40, has issued 2 million shares, has increased its cumulated retained earnings by $2 million, and has a dividend yield of 2 percent. What is the price/earnings ratio of PacknCamp?

Suppose that consumption is 7500, taxes are 1800, and government expenditures are 1500. If national saving is 1500 and the economy is closed, what is the GDP?

How does the risk of long-term bonds compare with short-term bonds?

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Lenders sell bonds, and borrowers buy them.

Suppose Parliament instituted an investment tax credit. What would most likely happen in the market for loanable funds?

Suppose a country repeals its investment tax credit. What is most likely to happen in the market for loanable funds?

Corporations receive no proceeds from the resale of their stock.

What does a high price/earnings ratio indicate?

Which statement best explains why the debt-to-GDP ratio is important?

What is a characteristic of the bond market?

Mount Adams Jazz Corporation has a price of $50, a dividend of $0.50, and retained earnings of $1.00 per share. What is the dividend yield on this stock?

Suppose that in a closed economy GDP is 10,000, consumption is 6500, and taxes are 2000. What value of government expenditures would make national saving equal 1500?

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

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Exam 8: Saving, Investment, and the Financial System

Public saving is equal to national saving minus private saving.

If the current market interest rate for loanable funds is below the equilibrium level, what would we expect to happen?

National saving is equal to Y - T - C.

What is most likely to happen if Canada increases its budget deficit?

What is the face value of a bond?

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

Which expression represents national saving in a closed economy?

PacknCamp Corporation has a price of $40, has issued 2 million shares, has increased its cumulated retained earnings by $2 million, and has a dividend yield of 2 percent. What is the price/earnings ratio of PacknCamp?

Suppose that consumption is 7500, taxes are 1800, and government expenditures are 1500. If national saving is 1500 and the economy is closed, what is the GDP?

How does the risk of long-term bonds compare with short-term bonds?

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Lenders sell bonds, and borrowers buy them.

Suppose Parliament instituted an investment tax credit. What would most likely happen in the market for loanable funds?

Suppose a country repeals its investment tax credit. What is most likely to happen in the market for loanable funds?

Corporations receive no proceeds from the resale of their stock.

What does a high price/earnings ratio indicate?

Which statement best explains why the debt-to-GDP ratio is important?

What is a characteristic of the bond market?

Mount Adams Jazz Corporation has a price of $50, a dividend of $0.50, and retained earnings of $1.00 per share. What is the dividend yield on this stock?

Suppose that in a closed economy GDP is 10,000, consumption is 6500, and taxes are 2000. What value of government expenditures would make national saving equal 1500?

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