Exam 13: Saving Investment and the Financial System: Part A

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories are sold.What type of risk for bondholders falls? What happens to the interest rate on this company's bonds?

Which government policy raises the interest rate and raises investment spending?

Public saving is the difference between ----- and -----.

Congress and the President implement an investment tax credit.Which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

When the government increases its borrowing, the budget _____ increases and government debt _____. The resulting change in investment due to this increased government borrowing is called _____.

The interest rate will______and the quantity of loanable funds invested will_______when the government decreases the budget deficit.

In a closed economy,GDP is $1000,government purchases are $200,and consumption is $700.If the government has a budget surplus of $25,what are investment,taxes,private saving,and national saving?

In the terminology of macroeconomics,what's the difference between a saver and an investor?

Your brother-in-law wants to buy either stock or bonds in Cedar Valley Furniture,which manufactures wooden furniture.He wants your advice on whether to buy stock or bonds.Explain how each of his quotes below should affect his choice between the stock and the bond. a."I have reason to believe that people are soon going to find rocking chairs have health benefits." b."I would like to tell people I am part owner of Cedar Valley Furniture." c."I do not want to take on much risk."

In macroeconomics, _____ refers to the purchase of new capital.

If federal tax rates increased,what would happen to the interest rate on municipal bonds?

What is a mutual fund?

National saving is the sum of _____ and _____. In a closed economy it is equal to _____ in equilibrium.

The model of the market for loanable funds shows that an investment tax credit will cause interest rates to rise and investment to rise.Yet we also suppose that higher interest rates lead to lower investment.How can these two conclusions be reconciled?

Suppose the Move It! exercise chain has revenues of $45 million,accounting costs of $15 million,and currently has issued 10 million shares of stocks selling at $90 each.Compute the price-earning ratio.Show your work.Is this ratio relatively high or low? What might an increase in the price-earnings ratio indicate?

What is the source of the supply of loanable funds?

Bonds issued by state and local governments are called _____ bonds. Bonds issued by financially shaky corporations are called _____ bonds. Of these two, which type of bond usually pays a relatively higher interest rate?

Congress and the President allow people to make greater contributions to tax-deferred savings accounts.Which curve in the market for loanable funds would shift,which direction would it shift,what would happen to the interest rate,and what would happen to investment spending?

A higher interest rate makes _____ more attractive. Therefore the quantity of loanable funds supplied increases.

When tax code changes reduce investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment.