Question 1

Which of the following statements is correct?

Accepted Answer

A)  A large, well-known corporation such as Proctor and Gamble would generally use financial intermediation to finance expansion of its factories. 
B)  On average, indexed funds outperform managed funds. 
C)  Unlike corporate bonds and stocks, checking accounts are a store of value. 
D)  Financial intermediaries are institutions through which savers can directly provide funds to borrowers. 
A)  A large, well-known corporation such as Proctor and Gamble would generally use financial intermediation to finance expansion of its factories. 
B)  On average, indexed funds outperform managed funds. 
C)  Unlike corporate bonds and stocks, checking accounts are a store of value. 
D)  Financial intermediaries are institutions through which savers can directly provide funds to borrowers. B

Question 2

Midwestern corporation issues bonds. Southern corporation issues stock. Which corporation used equity financing?

Accepted Answer

A)  both Midwestern corporation and Southern corporation 
B)  Midwestern corporation but not Southern corporation 
C)  Southern corporation but not Midwestern corporation 
D)  neither Midwestern nor Southern corporation 
A)  both Midwestern corporation and Southern corporation 
B)  Midwestern corporation but not Southern corporation 
C)  Southern corporation but not Midwestern corporation 
D)  neither Midwestern nor Southern corporation C

Question 3

Institutions that help to match one person's saving with another person's investment are collectively called the

Accepted Answer

A)  Federal Reserve system. 
B)  banking system. 
C)  monetary system. 
D)  financial system. 
A)  Federal Reserve system. 
B)  banking system. 
C)  monetary system. 
D)  financial system. D

Question 4

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

Accepted Answer

A)  supply of existing shares of the stock and the price will both rise. 
B)  supply of existing shares of the stock and the price will both fall. 
C)  demand for existing shares of the stock and the price will both rise. 
D)  demand for existing shares of the stock and the price will both fall. 
A)  supply of existing shares of the stock and the price will both rise. 
B)  supply of existing shares of the stock and the price will both fall. 
C)  demand for existing shares of the stock and the price will both rise. 
D)  demand for existing shares of the stock and the price will both fall.

Question 5

In the language of macroeconomics, investment refers to

Accepted Answer

A)  saving. 
B)  the purchase of new capital. 
C)  the purchase of stocks, bonds, or mutual funds. 
D)  All of the above are correct. 
A)  saving. 
B)  the purchase of new capital. 
C)  the purchase of stocks, bonds, or mutual funds. 
D)  All of the above are correct.

Question 6

Stocks and bonds

Accepted Answer

A)  and checking accounts are all stores of value and commonly function as mediums of exchange. 
B)  and checking accounts are all stores of value, but only stocks and bonds commonly function as mediums of exchange. 
C)  and checking accounts are all stores of value, but only checking accounts commonly function as mediums of exchange. 
D)  and checking accounts all commonly function as mediums of exchange, but only stocks and bonds are a store of value. 
A)  and checking accounts are all stores of value and commonly function as mediums of exchange. 
B)  and checking accounts are all stores of value, but only stocks and bonds commonly function as mediums of exchange. 
C)  and checking accounts are all stores of value, but only checking accounts commonly function as mediums of exchange. 
D)  and checking accounts all commonly function as mediums of exchange, but only stocks and bonds are a store of value.

Question 7

Bolivia had a smaller budget deficit in 2003 than in 2002. Other things the same, we would expect this reduction in the budget deficit to have

Accepted Answer

A)  increased both interest rates and investment. 
B)  increased interest rates and decreased investment. 
C)  decreased interest rates and increased investment. 
D)  decreased both interest rates and investment. 
A)  increased both interest rates and investment. 
B)  increased interest rates and decreased investment. 
C)  decreased interest rates and increased investment. 
D)  decreased both interest rates and investment.

Question 8

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

Accepted Answer

A)  there is a surplus and the interest rate is above the equilibrium level. 
B)  there is a surplus and the interest rate is below the equilibrium level. 
C)  there is a shortage and the interest rate is above the equilibrium level. 
D)  there is a shortage and the interest rate is below the equilibrium level. 
A)  there is a surplus and the interest rate is above the equilibrium level. 
B)  there is a surplus and the interest rate is below the equilibrium level. 
C)  there is a shortage and the interest rate is above the equilibrium level. 
D)  there is a shortage and the interest rate is below the equilibrium level.

Question 9

When the U.S. government is in debt during a given year, it follows that its budget is in deficit for that year.

Accepted Answer

A) True 
 B)False

Question 10

Use the following table to answer the following questions.
Table 8-2
  
-Refer to Table 8-2. Which company had the lowest dollar dividend?

Accepted Answer

A)  Boeing Co. 
B)  Eli Lilly and Co. 
C)  H. J. Heinz and Co. 
D)  Kellog Co. 
A)  Boeing Co. 
B)  Eli Lilly and Co. 
C)  H. J. Heinz and Co. 
D)  Kellog Co.

Question 11

Use the following table to answer the following questions.
Table 8-2
  
-Refer to Table 8-2. Which company had the lowest earnings per share?

Accepted Answer

A)  Boeing Co. 
B)  Eli Lilly and Co. 
C)  H. J. Heinz and Co. 
D)  Kellog Co. 
A)  Boeing Co. 
B)  Eli Lilly and Co. 
C)  H. J. Heinz and Co. 
D)  Kellog Co.

Question 12

If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

Accepted Answer

A) True 
 B)False

Question 13

A mutual fund

Accepted Answer

A)  is a financial market where small firms mutually agree to sell stocks and bonds to raise funds. 
B)  is funds set aside by local governments to lend to small firms who want to invest in projects that are mutually beneficial to the firm and community. 
C)  sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit. 
D)  is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks, bonds, or both stocks and bonds. 
A)  is a financial market where small firms mutually agree to sell stocks and bonds to raise funds. 
B)  is funds set aside by local governments to lend to small firms who want to invest in projects that are mutually beneficial to the firm and community. 
C)  sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit. 
D)  is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks, bonds, or both stocks and bonds.

Question 14

Which of the following lists correctly identifies the four expenditure categories of GDP?

Accepted Answer

A)  consumption, government purchases, investment, net-exports 
B)  consumption, investment, depreciation, net-exports 
C)  consumption, saving, investment, depreciation, 
D)  consumption, government purchases, investment, savings 
A)  consumption, government purchases, investment, net-exports 
B)  consumption, investment, depreciation, net-exports 
C)  consumption, saving, investment, depreciation, 
D)  consumption, government purchases, investment, savings

Question 15

The number of shares of Biggie Corporation stock outstanding in 2007 was 100 million. In 2007, Biggie stock paid a dividend of $2.40 per share and its dividend yield was 4 percent. If the price-earnings ratio is 16, then Biggie's total earnings in 2007 amounted to

Accepted Answer

A)  $1.92 million. 
B)  $87.50 million. 
C)  $375.00 million. 
D)  $960.00 million. 
A)  $1.92 million. 
B)  $87.50 million. 
C)  $375.00 million. 
D)  $960.00 million.

Question 16

Which of the following would both make the interest rate on a bond higher than otherwise?

Accepted Answer

A)  the interest it pays is taxed and it is long term 
B)  the interest it pays is taxed and it is short term 
C)  the interest it pays is tax exempt and it is long term 
D)  the interest it pays is tax exempt and it is short term 
A)  the interest it pays is taxed and it is long term 
B)  the interest it pays is taxed and it is short term 
C)  the interest it pays is tax exempt and it is long term 
D)  the interest it pays is tax exempt and it is short term

Question 17

Which of the following is correct?

Accepted Answer

A)  Lenders sell bonds and borrowers buy them. 
B)  Long-term bonds usually pay a lower interest rate than do short-term bonds because long-term bonds are riskier. 
C)  The term junk bonds refers to bonds that have been resold many times. 
D)  None of the above is correct. 
A)  Lenders sell bonds and borrowers buy them. 
B)  Long-term bonds usually pay a lower interest rate than do short-term bonds because long-term bonds are riskier. 
C)  The term junk bonds refers to bonds that have been resold many times. 
D)  None of the above is correct.

Question 18

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Accepted Answer

A)  saving and the interest rate 
B)  saving but not the interest rate 
C)  the interest rate but not saving 
D)  neither saving nor the interest rate 
A)  saving and the interest rate 
B)  saving but not the interest rate 
C)  the interest rate but not saving 
D)  neither saving nor the interest rate

Question 19

A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will

Accepted Answer

A)  demand the required funds by buying bonds. 
B)  demand the required funds by selling bonds. 
C)  supply the required funds by buying bonds. 
D)  supply the required funds by selling bonds. 
A)  demand the required funds by buying bonds. 
B)  demand the required funds by selling bonds. 
C)  supply the required funds by buying bonds. 
D)  supply the required funds by selling bonds.

Question 20

Owners of bonds that were issued by the federal government are not required to pay federal income tax on the interest income.

Accepted Answer

A) True 
 B)False

Which of the following statements is correct?

Midwestern corporation issues bonds. Southern corporation issues stock. Which corporation used equity financing?

Institutions that help to match one person's saving with another person's investment are collectively called the

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

In the language of macroeconomics, investment refers to

Stocks and bonds

Bolivia had a smaller budget deficit in 2003 than in 2002. Other things the same, we would expect this reduction in the budget deficit to have

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

When the U.S. government is in debt during a given year, it follows that its budget is in deficit for that year.

Use the following table to answer the following questions. Table 8-2 -Refer to Table 8-2. Which company had the lowest dollar dividend?

Use the following table to answer the following questions. Table 8-2 -Refer to Table 8-2. Which company had the lowest earnings per share?

If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

A mutual fund

Which of the following lists correctly identifies the four expenditure categories of GDP?

The number of shares of Biggie Corporation stock outstanding in 2007 was 100 million. In 2007, Biggie stock paid a dividend of $2.40 per share and its dividend yield was 4 percent. If the price-earnings ratio is 16, then Biggie's total earnings in 2007 amounted to

Which of the following would both make the interest rate on a bond higher than otherwise?

Which of the following is correct?

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will

Owners of bonds that were issued by the federal government are not required to pay federal income tax on the interest income.

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

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 8: Saving, Investment, and the Financial System

Which of the following statements is correct?

Midwestern corporation issues bonds. Southern corporation issues stock. Which corporation used equity financing?

Institutions that help to match one person's saving with another person's investment are collectively called the

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

In the language of macroeconomics, investment refers to

Stocks and bonds

Bolivia had a smaller budget deficit in 2003 than in 2002. Other things the same, we would expect this reduction in the budget deficit to have

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

When the U.S. government is in debt during a given year, it follows that its budget is in deficit for that year.

Use the following table to answer the following questions. Table 8-2 -Refer to Table 8-2. Which company had the lowest dollar dividend?

Use the following table to answer the following questions. Table 8-2 -Refer to Table 8-2. Which company had the lowest earnings per share?

If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

A mutual fund

Which of the following lists correctly identifies the four expenditure categories of GDP?

The number of shares of Biggie Corporation stock outstanding in 2007 was 100 million. In 2007, Biggie stock paid a dividend of $2.40 per share and its dividend yield was 4 percent. If the price-earnings ratio is 16, then Biggie's total earnings in 2007 amounted to

Which of the following would both make the interest rate on a bond higher than otherwise?

Which of the following is correct?

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will

Owners of bonds that were issued by the federal government are not required to pay federal income tax on the interest income.

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

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