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

A _____ does not engage in international trade in goods and services and it does not engage in international borrowing and lending.

If the government reduces transfer payments,what happens to the budget deficit? What curve does this change in the market for loanable funds,which direction does it shift,and what happens to the equilibrium interest rate?

What is a bond buyer promised when she buys a bond?

If at some interest rate desired investment is $400 billion,desired private saving is $600 billion,and the budget deficit is $300 billion,is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

_____ and _____ are the two most important financial intermediaries.

If the government budget deficit increases,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 spending (holding taxes constant), the budget balance _____. This causes the interest rate in the market for loanable funds to _____ and investment to _____.

A higher interest rate makes _____ less attractive. Therefore the quantity of loanable funds demanded decreases.

A _____ is a certificate of indebtedness and a _____ is a claim to partial ownership in a firm.

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

What are the basic differences between bonds and stocks?

What is the main function of the financial system?

List three characteristics of a bond that would make its interest rate higher than otherwise.

A restaurant chain announces declining revenues. What’s the name of the type of risk that this news raises for holders of this chain’s bonds? What does this news to do the interest rate on this chain’s bonds?

The financial system is important because it helps to match one person’s _____ with another person’s _____.

What variable adjusts to balance demand and supply in the market for loanable funds?

An increase in the government budget deficit causes national saving to _____, the interest rate to _____, and investment to _____.

In the national income accounting identity showing the equality between national saving and investment,what are the algebraic expressions for private saving and public saving?

In a closed economy, Y - C - G equals _____. The variable Y is _____, C is _____, and G is _____.

In a closed economy private saving is $500 billion and the government budget deficit is $100 billion.What is investment?