Question 1

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

Accepted Answer

The supply of loanable funds w...

Question 2

All else equal, when people become more optimistic about a company's future, the

Accepted Answer

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

Question 3

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Accepted Answer

A)  Private saving is equal to government expenditures.
B)  Public saving is equal to investment.
C)  After paying their taxes and paying for their consumption, households have nothing left.
D)  The government's tax revenue is equal to its expenditures.E) A) and B)
F) None of the above

Question 4

If there is a shortage in the market for loanable funds, what happens to desired saving and desired investment as the interest rate moves to its equilibrium value?

Accepted Answer

A)  desired saving and desired investment both fall
B)  desired saving and desired investment both rise
C)  desired saving falls and desired investment rises
D)  desired saving rises and desired investment fallsE) C) and D)
F) B) and D)

Question 5

An increase in the quantity of loanable funds traded means that

Accepted Answer

A)  firms are borrowing less and investment decreases.
B)  firms are borrowing less and investment increases.
C)  firms are borrowing more and investment increases.
D)  firms are borrowing more and investment decreases.E) None of the above
F) A) and B)

Question 6

Scenario 26-2. Assume the following information for an imaginary, closed economy.
GDP = $5 trillion; consumption = $3.1 trillion;
government purchases = $0.7 trillion; and taxes = $0.9 trillion.
-Refer to Scenario 26-2. For this economy, public saving is equal to

Accepted Answer

A)  $0.2 trillion and the government is running a budget surplus of $0.2 trillion.
B)  $0.2 trillion and the government is running a budget deficit of $0.2 trillion.
C)  -$0.2 trillion and the government is running a budget deficit of $0.2 trillion.
D)  -$0.2 trillion and the government is running a budget surplus of $0.2 trillion.E) C) and D)
F) A) and B)

Question 7

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the price-earnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Accepted Answer

A)  $15.6 million.
B)  $250 million.
C)  $160 million.
D)  $625 million.E) B) and D)
F) B) and C)

Question 8

Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds?

Accepted Answer

A)  The demand for loanable funds shifted rightward.
B)  The demand for loanable funds shifted leftward.
C)  The supply of loanable funds shifted rightward.
D)  The supply of loanable funds shifted leftward.E) B) and D)
F) B) and C)

Question 9

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?

Accepted Answer

The supply of loanab...

Question 10

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would

Accepted Answer

A)  raise both private and public saving.
B)  raise private saving and lower public saving.
C)  lower private saving and raise public saving.
D)  lower private and public saving.E) All of the above
F) C) and D)

Question 11

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

Accepted Answer

bond, stoc...

Question 12

Lenders sell bonds and borrowers buy them.

Accepted Answer

A) True 
 B)False

Question 13

If national saving in a closed economy is greater than zero, which of the following must be true?

Accepted Answer

A)  Either public saving or private saving must be greater than zero.
B)  Investment is positive.
C)   
D)  All of the above are correct.E) A) and B)
F) B) and C)

Question 14

Which government policy raises the interest rate and raises investment spending?

Accepted Answer

An investm...

Question 15

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories are sold. What type of risk for bondholders falls? What happens to the interest rate on this company's bonds?

Accepted Answer

default ri...

Question 16

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

Accepted Answer

The answer of When someone borrows to purchase capital goods,...

Question 17

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

Accepted Answer

A) True 
 B)False

Question 18

Other things the same, as the maturity of a bond becomes longer, the bond will pay

Accepted Answer

A)  a lower interest rate because it has less risk.
B)  a lower interest rate because it has more risk.
C)  a higher interest rate because it has more risk.
D)  the same interest rate, because there is no relationship between term and risk.E) A) and B)
F) A) and C)

Question 19

Which of the following statements is correct?

Accepted Answer

A)  NASDAQ is an important stock exchange in the United States.
B)  The demand for a corporation's stock is largely based on people's perception of the corporation's profitability in the future.
C)  Compared to the Standard & Poor's 500 Index, the Dow Jones Industrial Average incorporates the stock prices of a much smaller number of corporations.
D)  All of the above are correct.E) A) and B)
F) A) and D)

Question 20

Suppose the economy is closed and consumption is 8 million, taxes are 2 million, and government purchases are 1.75 million. If national saving amounts to 1.25 million, then what is GDP?

Accepted Answer

A)  9 million.
B)  9.5 million.
C)  13 million.
D)  11 million.E) None of the above
F) A) and D)

Exam 26: Saving, Investment, and the Financial System

Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds?

Correct AnswerverifiedShow Answer

If there is a shortage in the market for loanable funds, what happens to desired saving and desired investment as the interest rate moves to its equilibrium value?

Correct AnswerverifiedShow Answer

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

Correct AnswerverifiedThe supply of loanable funds w...View AnswerShow Answer

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories are sold. What type of risk for bondholders falls? What happens to the interest rate on this company's bonds?

Correct Answerverifieddefault ri...View AnswerShow Answer

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

Correct Answerverifiedbond, stoc...View AnswerShow Answer

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?

Correct AnswerverifiedThe supply of loanab...View AnswerShow Answer

All else equal, when people become more optimistic about a company's future, the

Correct AnswerverifiedShow Answer

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the price-earnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Correct AnswerverifiedShow Answer

Lenders sell bonds and borrowers buy them.

Correct AnswerverifiedShow Answer

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

Correct AnswerverifiedShow Answer

Other things the same, as the maturity of a bond becomes longer, the bond will pay

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Scenario 26-2. Assume the following information for an imaginary, closed economy. GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion. -Refer to Scenario 26-2. For this economy, public saving is equal to

Correct AnswerverifiedShow Answer

Suppose the economy is closed and consumption is 8 million, taxes are 2 million, and government purchases are 1.75 million. If national saving amounts to 1.25 million, then what is GDP?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in the quantity of loanable funds traded means that

Correct AnswerverifiedShow Answer

Which government policy raises the interest rate and raises investment spending?

Correct AnswerverifiedAn investm...View AnswerShow Answer

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Correct AnswerverifiedShow Answer

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would

Correct AnswerverifiedShow Answer

If national saving in a closed economy is greater than zero, which of the following must be true?

Correct AnswerverifiedShow Answer

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The supply of loanable funds w...
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The two most important financial markets are the _ market and the _ market.

Correct Answer
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bond, stoc...
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The supply of loanab...
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When someone borrows to purchase capital goods, he is using someone else's _ to fund his _.

Correct Answer
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An investm...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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