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Principles of Macroeconomics Study Set 8
Exam 13: Saving Investment and the Financial System: Part A
Path 4
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Question 21
Essay
A _____ does not engage in international trade in goods and services and it does not engage in international borrowing and lending.
Question 22
Essay
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?
Question 23
Essay
What is a bond buyer promised when she buys a bond?
Question 24
Essay
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?
Question 25
Essay
_____ and _____ are the two most important financial intermediaries.
Question 26
Essay
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?
Question 27
Essay
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 _____.
Question 28
Essay
A higher interest rate makes _____ less attractive. Therefore the quantity of loanable funds demanded decreases.
Question 29
Essay
A _____ is a certificate of indebtedness and a _____ is a claim to partial ownership in a firm.
Question 30
Essay
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.
Question 31
Essay
What are the basic differences between bonds and stocks?
Question 32
Essay
What is the main function of the financial system?
Question 33
Essay
List three characteristics of a bond that would make its interest rate higher than otherwise.
Question 34
Essay
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?