Question 1

If there is shortage of loanable funds,what is most likely to happen?

Accepted Answer

A)  The supply for loanable funds shifts right and the demand shifts left. 
B)  The supply for loanable funds shifts left and the demand shifts right. 
C)  Neither curve shifts,but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D)  Neither curve shifts,but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium. 
A)  The supply for loanable funds shifts right and the demand shifts left. 
B)  The supply for loanable funds shifts left and the demand shifts right. 
C)  Neither curve shifts,but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D)  Neither curve shifts,but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium. C

Question 2

How is a perpetuity distinguished from other bonds?

Accepted Answer

A)  It pays continuously compounded interest. 
B)  It pays interest only when it matures. 
C)  It never matures. 
D)  The principal is repaid over the term of the bond rather than as a lump sum. 
A)  It pays continuously compounded interest. 
B)  It pays interest only when it matures. 
C)  It never matures. 
D)  The principal is repaid over the term of the bond rather than as a lump sum. C

Question 3

When will a change in the tax laws that increases the supply of loanable funds have a bigger effect on investment?

Accepted Answer

A)  when the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic 
B)  when the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic 
C)  when both the demand for and supply of loanable funds are more elastic 
D)  when both the demand for and supply of loanable funds are more inelastic 
A)  when the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic 
B)  when the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic 
C)  when both the demand for and supply of loanable funds are more elastic 
D)  when both the demand for and supply of loanable funds are more inelastic A

Question 4

In a closed economy,what does (T - G)represent?

Accepted Answer

A)  national saving 
B)  investment 
C)  private saving 
D)  public saving 
A)  national saving 
B)  investment 
C)  private saving 
D)  public saving

Question 5

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

Accepted Answer

A)  corporate bond,municipal bond,federal government bond 
B)  corporate bond,federal government bond,municipal bond 
C)  municipal bond,federal government bond,corporate bond 
D)  municipal bond,corporate bond,federal government bond 
A)  corporate bond,municipal bond,federal government bond 
B)  corporate bond,federal government bond,municipal bond 
C)  municipal bond,federal government bond,corporate bond 
D)  municipal bond,corporate bond,federal government bond

Question 6

Table 8-3  
-Refer to the Table 8-3.Supposing equilibrium exists in the market for loanable funds,what is the quantity of funds supplied in this market?

Accepted Answer

A)  $2.2 trillion 
B)  $2.5 trillion 
C)  $2.8 trillion 
D)  $3.1 trillion 
A)  $2.2 trillion 
B)  $2.5 trillion 
C)  $2.8 trillion 
D)  $3.1 trillion

Question 7

Which statement best defines retained earnings?

Accepted Answer

A)  They are the amounts paid out as dividends. 
B)  They are the amount of revenues a corporation receives for the sale of its products,minus its costs of production,as measured by its accountants. 
C)  They are interest paid to creditors. 
D)  They are profits not paid out to shareholders. 
A)  They are the amounts paid out as dividends. 
B)  They are the amount of revenues a corporation receives for the sale of its products,minus its costs of production,as measured by its accountants. 
C)  They are interest paid to creditors. 
D)  They are profits not paid out to shareholders.

Question 8

What would most likely happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Accepted Answer

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

Question 9

Suppose the Steamhot yoga chain has revenues of $55 million,costs of $105 million,and currently has issued 20 million shares selling at $30 each.Compute the price / earnings ratio.Show your work.Is this ratio relatively high or low? What might an increase in the price / earnings ratio indicate?

Accepted Answer

The earnings per share is ($55 million -

Question 10

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

Accepted Answer

A)  1 percent 
B)  3 percent 
C)  5 percent 
D)  7 percent 
A)  1 percent 
B)  3 percent 
C)  5 percent 
D)  7 percent

Question 11

Explain why the demand for loanable funds slopes downward and the supply of loanable funds slopes upward.

Accepted Answer

When the interest rate rises,investment

Question 12

Which term refers to the length of time until a bond matures?

Accepted Answer

A)  duration 
B)  term 
C)  maturity 
D)  expiration period 
A)  duration 
B)  term 
C)  maturity 
D)  expiration period

Question 13

In a closed economy,what is private saving?

Accepted Answer

A)  the amount of income that households have left after paying for their taxes and consumption 
B)  the amount of income that businesses have left after paying for the factors of production 
C)  the amount of tax revenue that the government has left after paying for its spending 
D)  the amount of tax revenue that the government has left after paying for transfers 
A)  the amount of income that households have left after paying for their taxes and consumption 
B)  the amount of income that businesses have left after paying for the factors of production 
C)  the amount of tax revenue that the government has left after paying for its spending 
D)  the amount of tax revenue that the government has left after paying for transfers

Question 14

Which term refers to the profits paid out to shareholders?

Accepted Answer

A)  retained earnings 
B)  dividends 
C)  interest 
D)  shares 
A)  retained earnings 
B)  dividends 
C)  interest 
D)  shares

Question 15

Henry buys a bond issued by Bombardier,which uses the funds to buy new machinery for one of its factories.Who is investing and who is saving?

Accepted Answer

A)  Henry and Bombardier are both investing. 
B)  Henry and Bombardier are both saving. 
C)  Henry is investing; Bombardier is saving. 
D)  Henry is saving; Bombardier is investing. 
A)  Henry and Bombardier are both investing. 
B)  Henry and Bombardier are both saving. 
C)  Henry is investing; Bombardier is saving. 
D)  Henry is saving; Bombardier is investing.

Question 16

If the current market interest rate for loanable funds is below the equilibrium level,what is most likely to happen?

Accepted Answer

A)  The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will rise. 
B)  The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will rise. 
C)  The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will fall. 
D)  The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will fall. 
A)  The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will rise. 
B)  The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will rise. 
C)  The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will fall. 
D)  The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will fall.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

To make the financial markets safer,the Canadian government proposes tightening the rules for making a loan.Such rules require higher borrower creditworthiness and shorter pay-back periods.Analyze this proposal in a supply and demand for loanable funds model.

Accepted Answer

The demand for loanable funds remains un

Question 19

What is a medium of exchange?

Accepted Answer

A)  a stock exchange company 
B)  an item that makes transactions easier 
C)  a financial market 
D)  a stock or bond 
A)  a stock exchange company 
B)  an item that makes transactions easier 
C)  a financial market 
D)  a stock or bond

Question 20

Lenders sell bonds,and borrowers buy them.

Accepted Answer

A) True 
 B)False

If there is shortage of loanable funds,what is most likely to happen?

How is a perpetuity distinguished from other bonds?

When will a change in the tax laws that increases the supply of loanable funds have a bigger effect on investment?

In a closed economy,what does (T - G)represent?

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

Table 8-3 -Refer to the Table 8-3.Supposing equilibrium exists in the market for loanable funds,what is the quantity of funds supplied in this market?

Which statement best defines retained earnings?

What would most likely happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Suppose the Steamhot yoga chain has revenues of $55 million,costs of $105 million,and currently has issued 20 million shares selling at $30 each.Compute the price / earnings ratio.Show your work.Is this ratio relatively high or low? What might an increase in the price / earnings ratio indicate?

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

Explain why the demand for loanable funds slopes downward and the supply of loanable funds slopes upward.

Which term refers to the length of time until a bond matures?

In a closed economy,what is private saving?

Which term refers to the profits paid out to shareholders?

Henry buys a bond issued by Bombardier,which uses the funds to buy new machinery for one of its factories.Who is investing and who is saving?

If the current market interest rate for loanable funds is below the equilibrium level,what is most likely to happen?

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

To make the financial markets safer,the Canadian government proposes tightening the rules for making a loan.Such rules require higher borrower creditworthiness and shorter pay-back periods.Analyze this proposal in a supply and demand for loanable funds model.

What is a medium of exchange?

Lenders sell bonds,and borrowers buy them.

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

If there is shortage of loanable funds,what is most likely to happen?

How is a perpetuity distinguished from other bonds?

When will a change in the tax laws that increases the supply of loanable funds have a bigger effect on investment?

In a closed economy,what does (T - G)represent?

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

Table 8-3 -Refer to the Table 8-3.Supposing equilibrium exists in the market for loanable funds,what is the quantity of funds supplied in this market?

Which statement best defines retained earnings?

What would most likely happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Suppose the Steamhot yoga chain has revenues of $55 million,costs of $105 million,and currently has issued 20 million shares selling at $30 each.Compute the price / earnings ratio.Show your work.Is this ratio relatively high or low? What might an increase in the price / earnings ratio indicate?

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

Explain why the demand for loanable funds slopes downward and the supply of loanable funds slopes upward.

Which term refers to the length of time until a bond matures?

In a closed economy,what is private saving?

Which term refers to the profits paid out to shareholders?

Henry buys a bond issued by Bombardier,which uses the funds to buy new machinery for one of its factories.Who is investing and who is saving?

If the current market interest rate for loanable funds is below the equilibrium level,what is most likely to happen?

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

To make the financial markets safer,the Canadian government proposes tightening the rules for making a loan.Such rules require higher borrower creditworthiness and shorter pay-back periods.Analyze this proposal in a supply and demand for loanable funds model.

What is a medium of exchange?

Lenders sell bonds,and borrowers buy them.

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