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

When tax code changes reduce saving incentives, the interest rate will _____ and investment will _____.

How do banks make profits?

The income that households have left after paying their taxes and paying for their consumption is known as______.

Which of the two bonds in each example would you expect to generally pay the higher interest rate? Explain why. a.a U.S.government bond or a Venezuelan government bond b.a U.S.government bond or a municipal bond with the same term and issued by a creditworthy municipality. c.a 6-month Treasury bill or a 20-year Treasury bond d.a Microsoft bond or a bond issued by a new recording company

If consumers reduced their spending,what would happen to the interest rate and investment?

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

When tax code changes increase saving incentives, the interest rate will _____ and investment will _____.

Robert buys bonds.Rachel buys a new truck for her landscaping business.Identify both as savers,investors,both,or neither.

Suppose there is a shortage in the market for loanable funds.Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Bond A and Bond B have identical characteristics except that Bond A has a higher interest rate.Which bond has a higher credit risk?

Stock in Frozen Dreams,an ice cream manufacturer,has a price to earnings ratio of 24.Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

Bond A and Bond B are identical except Bond B has a longer term. Therefore, we expect Bond _____ to pay a higher rate of interest.

The two most important financial markets are the _____ market and the _____ market.

In a closed economy taxes are $750 billion,government transfers are $400 billion,government expenditures are $500 billion,and investment is $400 billion.What are private saving,public saving and national saving?

When someone borrows to purchase capital goods, he is using someone else’s _____ to fund his _____.

Suppose that you are a broker and people tell you the following about themselves.What sort of bond would you recommend to each? Defend your choices. a."I am in a high federal income tax bracket and I don't want to take very much risk." b."I want a high return and I am willing to take a lot of risk to get it." c."I want a decent return and I have enough deductions that I don't value tax breaks highly."

Using a graph representing the market for loanable funds,show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus.