Question 1

A closed economy does not engage in international trade, therefore

Accepted Answer

A) national saving is less than investment (S  I. 
D) national saving is zero.

Question 2

A perpetuity is distinguished from other bonds in that it

Accepted Answer

A) pays continuously compounded interest. 
B) pays interest only when it matures. 
C) never matures. 
D) will be used to purchase another bond when it matures unless the owner specifies otherwise.

Question 3

Which of the following is not a characteristic of a bond?

Accepted Answer

A) its tax treatment 
B) its credit risk 
C) its term 
D) its dividend yield

Question 4

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."

Accepted Answer

The answer of Your brother-in-law wants to buy either stock...

Question 5

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

Accepted Answer

The answer of When tax code changes increase saving incentives,...

Question 6

A corporation's earnings are

Accepted Answer

A) the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants minus the dividends paid out. 
B) the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists minus the dividends paid out. 
C) the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants. 
D) the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists.

Question 7

If the demand for loanable funds shifts to the right, then initially there is a

Accepted Answer

A) surplus so the interest rate will fall. 
B) surplus so the interest rate will rise. 
C) shortage so the interest rate will fall. 
D) shortage so the interest rate will rise.

Question 8

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

Accepted Answer

A) Private and public saving are both positive. 
B) Private saving is positive; public saving is negative. 
C) Private saving is negative; public saving is positive. 
D) Both private saving and public saving are negative.

Question 9

In a closed economy, what remains after paying for consumption and government purchases is

Accepted Answer

A) national disposable income. 
B) national saving. 
C) public saving. 
D) private saving.

Question 10

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 _____.

Accepted Answer

The answer of When the government increases its borrowing, the...

Question 11

​Bob's new startup goes public and sells shares of future profits. Bob's startup is best described as a

Accepted Answer

A) ​saver or as a supplier of funds. 
B) ​saver or as a demander of funds. 
C) ​borrower or as a supplier of funds. 
D) ​borrower or as a demander of funds.

Question 12

If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds, rather than the supply of loanable funds, then

Accepted Answer

A) crowding out would not be a consequence of an increase in the budget deficit. 
B) higher interest rates would not be a consequence of an increase in the budget deficit. 
C) an increase in the budget deficit would cause the demand for loanable funds to decrease. 
D) we would be making only a semantic change in how we analyze the effects of government budget deficits.

Question 13

When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving.

Accepted Answer

A) True 
 B)False

Question 14

We would expect the interest rate on Bond A to be lower than the interest rate on Bond B if the two bonds have identical characteristics except that

Accepted Answer

A) Bond A was issued by a financially weak corporation and Bond B was issued by a financially strong corporation. 
B) Bond A was issued by the Exxon Mobil Corporation and Bond B was issued by the state of New York. 
C) Bond A has a term of 1 year and Bond B has a term of 5 years. 
D) All of the above are correct.

Question 15

Scenario 26-1. Assume the following information for an imaginary, closed economy.
GDP = $100,000; taxes = $22,000; government purchases = $25,000; national
saving = $15,000.
-Refer to Scenario 26-1. For this economy, investment amounts to

Accepted Answer

A) $38,000. 
B) $18,000. 
C) $12,000. 
D) $15,000.

Question 16

On which of these bonds is the prospect of default least likely?

Accepted Answer

A) a junk bond 
B) a bond issued by the state of Arizona 
C) a bond issued by the federal government 
D) a bond issued by General Electric Corporation

Question 17

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?

Accepted Answer

The answer of A restaurant chain announces declining revenues. What's...

Question 18

Which of the following is correct?

Accepted Answer

A) Some bonds have terms as short as a few months. 
B) Because they are so risky, junk bonds pay a low rate of interest. 
C) Corporations buy bonds to raise funds. 
D) All of the above are correct.

Question 19

Public saving is the difference between _____ and _____.

Accepted Answer

The answer of Public saving is the difference between _____...

Question 20

Which of the following is correct?

Accepted Answer

A) In the national income accounts, investment and private saving refer to the same thing. 
B) In a closed economy if national saving is greater than zero, then everyone must be saving. 
C) The financial system channels funds from savers to borrowers. 
D) People whose consumption exceeds their income are savers.

Exam 26: Saving, Investment, and the Financial System

A closed economy does not engage in international trade, therefore

A perpetuity is distinguished from other bonds in that it

Which of the following is not a characteristic of a bond?

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

A corporation's earnings are

If the demand for loanable funds shifts to the right, then initially there is a

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

In a closed economy, what remains after paying for consumption and government purchases is

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 ___.

Bob's new startup goes public and sells shares of future profits. Bob's startup is best described as a

If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds, rather than the supply of loanable funds, then

When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving.

We would expect the interest rate on Bond A to be lower than the interest rate on Bond B if the two bonds have identical characteristics except that

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. -Refer to Scenario 26-1. For this economy, investment amounts to

On which of these bonds is the prospect of default least likely?

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?

Which of the following is correct?

Public saving is the difference between _ and _.

Which of the following is correct?

Exam 26: Saving, Investment, and the Financial System

A closed economy does not engage in international trade, therefore

A perpetuity is distinguished from other bonds in that it

Which of the following is not a characteristic of a bond?

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

A corporation's earnings are

If the demand for loanable funds shifts to the right, then initially there is a

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

In a closed economy, what remains after paying for consumption and government purchases is

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 _____.

​Bob's new startup goes public and sells shares of future profits. Bob's startup is best described as a

If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds, rather than the supply of loanable funds, then

When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving.

We would expect the interest rate on Bond A to be lower than the interest rate on Bond B if the two bonds have identical characteristics except that

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. -Refer to Scenario 26-1. For this economy, investment amounts to

On which of these bonds is the prospect of default least likely?

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?

Which of the following is correct?

Public saving is the difference between _____ and _____.

Which of the following is correct?

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

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 ___.

Bob's new startup goes public and sells shares of future profits. Bob's startup is best described as a

Public saving is the difference between _ and _.