Question 1

The supply of loanable funds slopes

Accepted Answer

A) upward because an increase in the interest rate induces people to save more. 
B) downward because an increase in the interest rate induces people to save less. 
C) downward because an increase in the interest rate induces people to invest less. 
D) upward because an increase in the interest rate induces people to invest more. 
A) upward because an increase in the interest rate induces people to save more. 
B) downward because an increase in the interest rate induces people to save less. 
C) downward because an increase in the interest rate induces people to invest less. 
D) upward because an increase in the interest rate induces people to invest more.

Question 2

The primary economic function of the financial system is to

Accepted Answer

A) keep interest rates low. 
B) provide expert advice to savers and investors. 
C) match one person's consumption expenditures with another person's capital expenditures. 
D) match one person's saving with another person's investment. 
A) keep interest rates low. 
B) provide expert advice to savers and investors. 
C) match one person's consumption expenditures with another person's capital expenditures. 
D) match one person's saving with another person's investment.

Question 3

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 4

Municipal bonds pay a relatively

Accepted Answer

A) low rate of interest because of their high default risk and because the interest they pay is subject to federal income tax. 
B) low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax. 
C) high rate of interest because of their high default risk and because federal taxes must be paid on the interest they pay. 
D) high rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax. 
A) low rate of interest because of their high default risk and because the interest they pay is subject to federal income tax. 
B) low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax. 
C) high rate of interest because of their high default risk and because federal taxes must be paid on the interest they pay. 
D) high rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.

Question 5

Which of the following is correct?

Accepted Answer

A) In the national income accounts, investment and private saving refer to the same thing. 
B) In a closed economy if national saving is greater than zero, then everyone must be saving. 
C) The financial system channels funds from savers to borrowers. 
D) People whose consumption exceeds their income are savers. 
A) In the national income accounts, investment and private saving refer to the same thing. 
B) In a closed economy if national saving is greater than zero, then everyone must be saving. 
C) The financial system channels funds from savers to borrowers. 
D) People whose consumption exceeds their income are savers.

Question 6

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Accepted Answer

A) True 
 B)False

Question 7

Figure 13-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars.  
-Refer to Figure 13-4. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 5 percent, then the equilibrium nominal interest rate is

Accepted Answer

A) lower than 6 percent.. 
B) approximately 6 percent. 
C) between 6 percent and 8 percent. 
D) approximately 12 percent. 
A) lower than 6 percent.. 
B) approximately 6 percent. 
C) between 6 percent and 8 percent. 
D) approximately 12 percent.

Question 8

The conventions of national income accounting imply that saving and investment are equal for the economy as a whole and for individual households and firms.

Accepted Answer

A) True 
 B)False

Question 9

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Accepted Answer

A) bond. 
B) stock. 
C) mutual fund. 
D) All of the above are correct. 
A) bond. 
B) stock. 
C) mutual fund. 
D) All of the above are correct.

Question 10

The bond market, the stock market, banks, pension funds, and insurance companies are all financial

Accepted Answer

A) systems. 
B) markets. 
C) institutions. 
D) intermediaries. 
A) systems. 
B) markets. 
C) institutions. 
D) intermediaries.

Question 11

Which of the following is a financial intermediary?

Accepted Answer

A) a mutual fund 
B) the stock market 
C) a U.S. government bond 
D) a wealthy individual who regularly buys and holds large quantities of government bonds 
A) a mutual fund 
B) the stock market 
C) a U.S. government bond 
D) a wealthy individual who regularly buys and holds large quantities of government bonds

Question 12

The purchase of a new house is the one form of

Accepted Answer

A) investment that is financed by private saving rather than public saving. 
B) household spending that is not counted as part of investment in the national income accounts. 
C) household spending that is investment rather than consumption. 
D) household spending that does not contribute to GDP. 
A) investment that is financed by private saving rather than public saving. 
B) household spending that is not counted as part of investment in the national income accounts. 
C) household spending that is investment rather than consumption. 
D) household spending that does not contribute to GDP.

Question 13

If an economy is closed and if it has no government, then

Accepted Answer

A) national saving = 0. 
B) national saving = private saving. 
C) public saving = investment. 
D) gross domestic product = consumption. 
A) national saving = 0. 
B) national saving = private saving. 
C) public saving = investment. 
D) gross domestic product = consumption.

The supply of loanable funds slopes

The primary economic function of the financial system is to

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

Municipal bonds pay a relatively

Which of the following is correct?

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Figure 13-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 13-4. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 5 percent, then the equilibrium nominal interest rate is

The conventions of national income accounting imply that saving and investment are equal for the economy as a whole and for individual households and firms.

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

The bond market, the stock market, banks, pension funds, and insurance companies are all financial

Which of the following is a financial intermediary?

The purchase of a new house is the one form of

If an economy is closed and if it has no government, then

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

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

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 Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 13: Saving, Investment, and the Financial System

The supply of loanable funds slopes

The primary economic function of the financial system is to

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

Municipal bonds pay a relatively

Which of the following is correct?

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Figure 13-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 13-4. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 5 percent, then the equilibrium nominal interest rate is

The conventions of national income accounting imply that saving and investment are equal for the economy as a whole and for individual households and firms.

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

The bond market, the stock market, banks, pension funds, and insurance companies are all financial

Which of the following is a financial intermediary?

The purchase of a new house is the one form of

If an economy is closed and if it has no government, then

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

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

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 Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters