Question 1

A larger budget deficit

Accepted Answer

A)  raises the interest rate and investment.
B)  reduces the interest rate and investment.
C)  raises the interest rate and reduces investment.
D)  reduces the interest rate and raises investment.E) A) and D)
F) A) and C)

Question 2

Scenario 13-1. Assume the following information for an imaginary, closed economy.   GDP =$120,000; consumption =$70,000; private savng =$9,000;  national saving =$12,000\begin{array} { l } 	ext { GDP } = \$ 120,000 ; 	ext { consumption } = \$ 70,000 ; 	ext { private savng } = \$ 9,000 	ext {; } \	ext { national saving } = \$ 12,000\end{array} GDP =$120,000; consumption =$70,000; private savng =$9,000;  national saving =$12,000​ 
-Refer to Scenario 13-1. For this economy, investment amounts to

Accepted Answer

A)  $4,000.
B)  $9,000.
C)  $12,000.
D)  $16,000. E) B) and C)
F) All of the above

Question 3

Fortunade Corporation stock has a price of $100 per share, a dividend of $1.60 per share, and retained earnings of $2.00 per share. The dividend yield on this stock is

Accepted Answer

A)  2.8 percent.
B)  2.0 percent.
C)  1.6 percent.
D)  0.4 percent.E) A) and B)
F) All of the above

Question 4

When a large, well-known corporation wishes to borrow directly from the public, it can

Accepted Answer

A)  sell bonds.
B)  sell shares of stock.
C)  go to a bank for a loan.
D)  All of the above are correct.E) C) and D)
F) None of the above

Question 5

To state that public saving is equal to investment, for a closed economy, is to state an accounting identity.

Accepted Answer

A) True 
 B)False

Question 6

In a closed economy, private saving is

Accepted Answer

A)  the amount of income that households have left after paying for their taxes and consumption.
B)  the amount of income that businesses have left after paying for the factors of production.
C)  the amount of tax revenue that the government has left after paying for its spending.
D)  always equal to investment.E) A) and B)
F) B) and C)

Question 7

Figure 13-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 13-3. Which of the following movements shows the effects of the government going from a budget deficit to a budget surplus?

Accepted Answer

A)  a movement from Point A to Point B
B)  a movement from Point B to Point A
C)  a movement from Point A to Point F
D)  a movement from Point C to Point BE) All of the above
F) C) and D)

Question 8

By definition, government purchases and taxes are zero for a closed economy.

Accepted Answer

A) True 
 B)False

Question 9

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Accepted Answer

A) True 
 B)False

Question 10

The term loanable funds refers to all income that is not used for consumption or government expenditures.

Accepted Answer

A) True 
 B)False

Question 11

To state that national saving is equal to investment, for a closed economy, is to state an accounting identity.

Accepted Answer

A) True 
 B)False

Question 12

If the budget deficit increases then

Accepted Answer

A)  saving and the interest rate rise
B)  saving rises and the interest rate falls
C)  saving falls and the interest rate rises
D)  saving and the interest rate fallsE) A) and B)
F) A) and C)

Question 13

In 2002 mortgage rates fell and mortgage lending increased. Which of the following could explain both of these changes?

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) All of the above
F) B) and C)

Question 14

It is claimed that a secondary advantage of mutual funds is that

Accepted Answer

A)  an investor can avoid investment charges and fees.
B)  they give ordinary people access to loanable funds for investing.
C)  they usually outperform stock market indexes.
D)  they give ordinary people access to the skills of professional money managers.E) A) and B)
F) A) and C)

Question 15

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

Accepted Answer

A)  there is a surplus so interest rates will rise.
B)  there is a surplus so interest rates will fall.
C)  there is a shortage so interest rates will rise.
D)  there is a shortage so interest rates will fall.E) All of the above
F) None of the above

Question 16

When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling bonds.

Accepted Answer

A) True 
 B)False

Question 17

The country of Meditor uses the merit as its currency. Recent national income statistics showed that it had GDP of $700 million merits, no government transfer payments, taxes of $210 million merits, a budget surplus of $60 billion merits, and investment of $100 billion merits. What were its consumption and government expenditures on goods and services?

Accepted Answer

A)  450 million merits and $150 million merits
B)  410 million merits and $150 million merits
C)  330 million merits and $270 million merits
D)  290 million merits and $270 million meritsE) None of the above
F) B) and C)

Question 18

The source of the supply of loanable funds

Accepted Answer

A)  is saving and the source of demand for loanable funds is investment.
B)  is investment and the source of demand for loanable funds is saving.
C)  and the demand for loanable funds is saving.
D)  and the demand for loanable funds is investment.E) A) and D)
F) All of the above

Question 19

The real interest rate is the

Accepted Answer

A)  interest rate corrected for inflation.
B)  interest rate as usually reported by banks.
C)  difference between the interest rate charged by banks on the loans they make and the interest rate paid by banks to their depositors.
D)  difference between the average dividend yield on stocks and the average interest rate on bonds.E) All of the above
F) A) and B)

Question 20

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Accepted Answer

A)  interest rates and the equilibrium quantity of loanable funds rise.
B)  interest rates rise and the equilibrium quantity of loanable funds fall.
C)  interest rates fall and the equilibrium quantity of loanable funds rise.
D)  interest rates and the equilibrium quantity of loanable funds fall.E) All of the above
F) A) and C)

Exam 13: Saving, Investment, and the Financial System

Correct Answer
verified

It is claimed that a secondary advantage of mutual funds is that

Correct Answer
verified

Fortunade Corporation stock has a price of $100 per share, a dividend of $1.60 per share, and retained earnings of $2.00 per share. The dividend yield on this stock is

Correct Answer
verified

When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling bonds.

Correct Answer
verified

To state that public saving is equal to investment, for a closed economy, is to state an accounting identity.

Correct Answer
verified

By definition, government purchases and taxes are zero for a closed economy.

Correct Answer
verified

In a closed economy, private saving is

Correct Answer
verified

The real interest rate is the

Correct Answer
verified

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Correct Answer
verified

If the budget deficit increases then

Correct Answer
verified

The source of the supply of loanable funds

Correct Answer
verified

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

Correct Answer
verified

To state that national saving is equal to investment, for a closed economy, is to state an accounting identity.

Correct Answer
verified

Correct Answer
verified

The term loanable funds refers to all income that is not used for consumption or government expenditures.

Correct Answer
verified

In 2002 mortgage rates fell and mortgage lending increased. Which of the following could explain both of these changes?

Correct Answer
verified

When a large, well-known corporation wishes to borrow directly from the public, it can

Correct Answer
verified

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Correct Answer
verified

Figure 13-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 13-3. Which of the following movements shows the effects of the government going from a budget deficit to a budget surplus?

Correct Answer
verified

A larger budget deficit

Correct Answer
verified

Exam 13: Saving, Investment, and the Financial System

Correct AnswerverifiedShow Answer

It is claimed that a secondary advantage of mutual funds is that

Correct AnswerverifiedShow Answer

Fortunade Corporation stock has a price of $100 per share, a dividend of $1.60 per share, and retained earnings of $2.00 per share. The dividend yield on this stock is

Correct AnswerverifiedShow Answer

When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling bonds.

Correct AnswerverifiedShow Answer

To state that public saving is equal to investment, for a closed economy, is to state an accounting identity.

Correct AnswerverifiedShow Answer

By definition, government purchases and taxes are zero for a closed economy.

Correct AnswerverifiedShow Answer

In a closed economy, private saving is

Correct AnswerverifiedShow Answer

The real interest rate is the

Correct AnswerverifiedShow Answer

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Correct AnswerverifiedShow Answer

If the budget deficit increases then

Correct AnswerverifiedShow Answer

The source of the supply of loanable funds

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

To state that national saving is equal to investment, for a closed economy, is to state an accounting identity.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The term loanable funds refers to all income that is not used for consumption or government expenditures.

Correct AnswerverifiedShow Answer

In 2002 mortgage rates fell and mortgage lending increased. Which of the following could explain both of these changes?

Correct AnswerverifiedShow Answer

When a large, well-known corporation wishes to borrow directly from the public, it can

Correct AnswerverifiedShow Answer

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Correct AnswerverifiedShow Answer

Figure 13-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 13-3. Which of the following movements shows the effects of the government going from a budget deficit to a budget surplus?

Correct AnswerverifiedShow Answer

A larger budget deficit

Correct AnswerverifiedShow Answer

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