Deck 7: Savings and Investment Process

Question 1

Real assets include direct ownership of land,buildings,machinery,inventory,commodities and precious metals.

Answer 1

True

Question 2

Capital consumption allowances are estimates of depreciation of plant and equipment assets for business purposes.

Answer 2

True

Question 3

A savings deficit occurs when investment in real assets exceeds current income.

Answer 3

True

Question 4

Personal consumption expenditures indicate expenditures by individuals for durable goods,nondurable goods,and services.

Question 5

Real assets include indirect ownership of land,buildings,machinery,inventory,commodities,and precious metals.

Question 6

The federal government relies primarily on borrowing to support its various expenditure programs.

Question 7

Indirect financing involves the use of securities that represent specific contracts between the savers and borrowers themselves.

Question 8

Government purchases include expenditures for goods and services by the federal government.

Question 9

Gross private domestic investment measures a nation's output of goods and services for a specified period of time.

Question 10

Capital consumption allowances are estimates of the "using up" of plant equipment assets for businesses.

Question 11

New York Stock Exchange is an example of a primary market.

Question 12

GDP includes personal consumption expenditures,government purchases of goods and services,gross private domestic investment,and net exports of goods and services.

Question 13

Direct benefit payments for individuals amount to over half of total expenditures of the federal government.

Question 14

Savings surplus occurs when all of an economic unit's income is not consumed,but held in the form of cash and other financial assets.

Question 15

Gross investment may or may not equal gross savings.

Question 16

Consumption is reflected by the sum of personal consumption expenditures and government purchases of goods and services.

Question 17

If the imports of goods and services exceed exports,GDP will be higher.

Question 18

Local governments depend heavily on property taxes for their revenues,while state governments depend largely on sales taxes and special taxes,such as those on tobacco products.

Question 19

The federal government relies primarily on income taxes and social insurance taxes for its revenues.

Question 20

Gross private domestic investment (GPDI)measures fixed investment in residential and nonresidential structures,producers' durable equipment,and changes in business inventories.

Question 21

Foreign capital did not play a significant role in the development of the United States.

Question 22

Net exports are exports of goods and services minus imports of goods and services.

Question 23

Corporate saving for short-term working capital purposes is the most important reason for businesses accumulating financial assets.

Question 24

When taxes and general revenues fail to meet expenditures,a budgetary deficit occurs.

Question 25

Capital formation is the process of constructing real property,manufacturing producers' durable equipment,and increasing business inventories.

Question 26

Savings surplus occurs when an economic unit has current income that exceeds its direct investment in real assets.

Question 27

In recent years,the United States has been running large trade surpluses with both Japan and China.

Question 28

The corporate retention rate is simply another term for the corporate savings rate.

Question 29

Net exports are exports of goods and services plus imports of goods and services.

Question 30

Voluntary savings are financial assets set aside for use in the future.

Question 31

Years of budget surpluses during the Reagan and first Bush presidencies changed into deficits under the Clinton presidency.

Question 32

In general,the savings rate in the United States has decreased during the past 40 years.

Question 33

The federal debt is the same thing as the budget deficit.

Question 34

Contractual savings are financial assets set aside for use in the future.

Question 35

Indirect financing involves the use of securities such as corporate stocks and bonds that represent specific contracts between the savers and borrowers themselves.

Question 36

The federal debt of the United States is owned to a large extent by foreign institutions and individuals.

Question 37

By definition,gross investment must equal gross savings.

Question 38

Savings are impacted only by cyclical movements in the economy.

Question 39

In recent years,the United States has been running large trade deficits with both Japan and China.

Question 40

At present,receipts of social insurance taxes received exceed payments made.However,it is expected that this situation will be reversed within the next two years.

Question 41

Financial assets include ownership of land,buildings,machinery,inventory,commodities,and precious metals.

Question 42

Capital formation refers to the:

A)total accumulation of monetary savings in the nation
B)distribution of savings among thrift institutions
C)total of capital stock accounts with business corporations
D)creation of physical productive facilities

Question 43

Direct financing involves the use of securities that represent specific contracts between savers and borrowers.

Question 44

Indirect financing is financing created by an intermediary that involves separate instruments with lenders and borrowers.

Question 45

Voluntary savings are savings accumulated on a regular schedule for a specified length of time by prior agreement.

Question 46

Contractual savings are savings accumulated on a regular schedule for a specified length of time by prior agreement.

Question 47

The major factors which influence the level of savings are the level of:

A)income and the life stage of the individual saver
B)income,economic expectations,cyclical influence,and the life stage of the individual saver
C)income,interest rates,and the life stage cycle of the individual saver
D)income and interest rates

Question 48

The largest proportion of government revenue comes from corporate income taxes.

Question 49

Which of the following represent the most important instrument used to raise funds in the credit markets?

A)corporate bonds
B)tax-exempt obligations
C)consumer debt
D)mortgages

Question 50

If personal consumption expenditures are $1 billion,government purchases are $2 billion,gross private domestic investments are $4 billion and net exports are $5 billion,then GDP is:

A)$11 billion
B)$8 billion
C)$7 billion
D)$2 billion
E)none of the above

Question 51

Personal consumption expenditures (PCE)does not include:

A)individual expenditures for durable goods
B)individual expenditures for nondurable goods
C)individual expenditures for services
D)all the above are included

Question 52

Gross Private Domestic Investment (GPDI)measures fixed investment in:

A)residential and non-residential structures
B)individual expenditures for nondurable goods
C)individual expenditures for services
D)none of the above

Question 53

Financial assets include claims in the form of obligations or liabilities issued by individuals,businesses,financial intermediaries,and governments.

Question 54

Capital formation refers to the:

A)total accumulation of monetary savings in the nation
B)distribution of savings among thrift institutions
C)total of capital stock accounts with business corporations
D)the construction of buildings in a country's capital city
E)none of the above

Question 55

Personal savings are savings accumulated on a regular schedule for a specified length of time by prior agreement.

Question 56

Undistributed profit is the proportion of after-tax profit paid as dividends to shareholders by a corporation.

Question 57

If personal consumption expenditures are $1 billion,government purchases are $2 billion,gross private domestic investments are $4 billion and net exports are $5 billion,then GDP is:

A)$12 billion
B)$8 billion
C)$7 billion
D)cannot be determined

Question 58

The primary factors that influence the total amount of savings in an economy in any given period include the trade surplus or deficit and exchange rates.

Question 59

Personal consumption expenditures (PCE)does not include:

A)individual expenditures for durable goods
B)individual expenditures for nondurable goods
C)individual expenditures for services
D)individual savings
E)all the above are included

Question 60

The most important savings surplus unit in the economy is:

A)the savings of individuals
B)corporate savings
C)U.S.government savings
D)state and local government savings

Question 61

A saver who chooses securities as a savings medium and desires maximum growth of principal buys:

A)public utility stocks
B)corporate stocks
C)high-grade corporate bonds
D)government bonds

Question 62

Early developments in transportation were ultimately financed by:

A)private promoters
B)current government revenues
C)savings of individuals
D)foreign securities

Question 63

Which one of the following instruments is the least important in terms of funds raised in the credit markets?

A)U.S.government securities
B)tax-exempt obligations
C)corporate bonds
D)mortgages

Question 64

Greater potential savings would result from a (n):

A)age distribution shift to more teenagers
B)shift to more elderly people in the total population
C)shift to more young married couples
D)shift to more middle-aged families

Question 65

Direct securities:

A)are contracts between savers and institutions
B)are contracts between savers and borrowers
C)represent the financial asset of the borrower and the claim on the saver
D)represent the claim on the institution

Question 66

A business loan to Joe's Hardware Store by a bank represents which of the following?

A)a liability of the bank and an asset to Joe's
B)an asset of the bank and a liability to Joe's
C)liability to the bank and capital to Joe's
D)liability to Joe's and capital to the bank

Question 67

Which of the following would not be holders of financial assets?

A)state governments
B)U.S.government
C)local governments
D)all might hold financial assets
E)none of the above hold financial assets

Question 68

Government-held reserves which are invested primarily in the in the obligations of federal,local,and state governments include:

A)life insurance
B)pension funds
C)retirement funds
D)money market funds

Question 69

Financial assets include all except which of the following:

A)productive facilities
B)time deposits
C)business loans
D)consumer loans

Question 70

If an individual supplies funds to a business firm by purchasing bonds issued by the firm,the transaction:

A)creates two types of financial assets and two types of financial liabilities
B)increases the liquidity and safety of principal for the individual
C)initially occurs in the primary market
D)limits the ability of the security to be sold in the secondary market

Question 71

The process of balancing savings surplus and savings deficit units by channeling savings into investment through a financial intermediary does not result in the:

A)individuals receiving safety of principal,liquidity,and a return on their savings
B)business firm anticipating earning a return on its investment in real assets that is lower than the interest cost on the institution loan
C)intermediary being compensated for facilitating the savings and investment process
D)creation of two types of financial assets and two types of financial liabilities

Question 72

Direct securities:

A)are contracts between savers and institutions
B)are deposited directly into an investor's account
C)represent the financial asset of the borrower and the claim on the saver
D)represent the claim on the institution
E)none of the above

Question 73

If an individual supplies funds to a business firm by purchasing bonds issued by the firm,the transaction:

A)creates two types of financial assets and two types of financial liabilities
B)increases the liquidity and safety of principal for the individual
C)initially occurs in the secondary market
D)limits the ability of the security to be sold in the secondary market
E)none of the above

Question 74

If an individual supplies funds to a business firm by purchasing bonds issued by the firm,the transaction:

A)creates two types of financial assets and two types of financial liabilities
B)increases the liquidity and safety of principal for the individual
C)initially occurs in the primary market
D)limits the ability of the security to be sold in the secondary market
E)all of the above

Question 75

A business loan to Joe's Hardware Store by a bank represents which of the following?

A)a liability of the bank and an asset to Joe's
B)a liability of the bank and a liability to Joe's
C)liability to the bank and capital to Joe's
D)liability to Joe's and capital to the bank
E)none of the above

Question 76

A saver who chooses securities as a savings medium and desires maximum safety of principal buys:

A)public utility stocks
B)corporate stocks
C)high-grade corporate bonds
D)government bonds

Question 77

Financial assets include all except which of the following:

A)common stocks
B)time deposits
C)business loans
D)consumer loans
E)all of the above are financial assets

Question 78

The short-term accumulation of financial assets on the part of business corporations:

A)are held in short-term,safe,and liquid debt obligations
B)add to the level of long-term savings of the economy as a whole
C)do not enter the monetary stream to fund consumers,government,or other businesses
D)are held in the form of long-term obligations of the federal government

Question 79

Which one of the following borrowing sectors is the least important in terms of funds raised in the credit markets?

A)U.S.markets
B)state and local governments
C)households
D)farms
E)corporate

Question 80

A business deposit in a commercial bank represents:

A)a liability of the bank and an asset to the business
B)an asset of the bank and a liability to the business
C)liability to the bank and capital to the business
D)liability to Joe's and capital to the business