Question 1

When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures

Accepted Answer

A)   capital investment.
B)   investment in human capital.
C)   business consumption expenditures.
D)   personal saving.E) All of the above
F) B) and D)

Question 2

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) C) and D)
F) A) and D)

Question 3

Profits not paid out to stockholders are

Accepted Answer

A)   retained earnings.
B)   known as dividends.
C)   the denominator in the price-earnings ratio.
D)   All of the above are correct.E) B) and C)
F) A) and C)

Question 4

Mandy purchases 68.2 shares of a mutual fund for $1,500. Cassie's purchase of these shares contributes $1,500 to which magnitude in the identity Y = C + I + G?

Accepted Answer

A)   C
B)   I
C)   G
D)   None of the above are correct.E) A) and B)
F) A) and C)

Question 5

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

Accepted Answer

A) True 
 B)False

Question 6

Banks

Accepted Answer

A)   play a role in creating an asset that people can use as a medium of exchange.
B)   are financial intermediaries, but mutual funds are not financial intermediaries.
C)   are financial markets, as are bond markets.
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 7

The single most important piece of information about a stock is its

Accepted Answer

A)   term.
B)   dividend.
C)   daily volume.
D)   price.E) B) and C)
F) A) and D)

Question 8

ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?

Accepted Answer

A)   only ABC
B)   only JLG
C)   both ABC and JLG
D)   neither ABC nor JLGE) None of the above
F) A) and D)

Question 9

Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. 
-Refer to Figure 26-4. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent, then the equilibrium real interest rate is

Accepted Answer

A)   lower than 6 percent.
B)   6 percent.
C)   between 6 percent and 8 percent.
D)   higher than 8 percent.E) A) and B)
F) A) and C)

Question 10

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

Question 11

Atlas Corporation is in sound financial condition. It sells a long-term bond. Which of the following make the interest rate on this bond lower than otherwise?

Accepted Answer

A)   Both Altas' sound finances and the long term of the bond.
B)   Atlas' sound finances but not the long term of the bond.
C)   The long term of the bond but not Atlas' sound finances.
D)   Neither Atlas' sound finances nor the long term of the bond.E) A) and B)
F) A) and C)

Question 12

Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds?

Accepted Answer

A)   The interest rate and investment would fall.
B)   The interest rate and investment would rise.
C)   The interest rate would rise and investment would fall.
D)   None of the above is necessarily correct.E) B) and D)
F) B) and C)

Question 13

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

Accepted Answer

A)   an increase in the demand for loanable funds, and that increase would originate from people who had some extra income they wanted to lend.
B)   an increase in the demand for loanable funds, and that increase would originate from households and firms who wish to borrow to make investments.
C)   a decrease in the demand for loanable funds, and that decrease would originate from people who had some extra income they wanted to lend.
D)   a decrease in the demand for loanable funds, and that decrease would originate from households and firms who wish to borrow to make investments.E) C) and D)
F) A) and B)

Question 14

A policy that induces people to save more shifts

Accepted Answer

A)   the supply of loanable funds and raises interest rates.
B)   the supply of loanable funds and reduces interest rates.
C)   the demand for loanable funds and raises interest rates.
D)   the demand for loanable funds and reduces interest rates.E) C) and D)
F) All of the above

Question 15

A larger budget surplus

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 B)
F) A) and D)

Question 16

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

Question 17

Other things the same, bonds are likely to have higher interest rates if they have

Accepted Answer

A)   tax exemptions and short terms.
B)   tax exemptions and long terms.
C)   no tax exemptions and short terms.
D)   no tax exemptions and long terms.E) C) and D)
F) B) and D)

Question 18

If consumers reduced their spending, what would happen to the interest rate and investment?

Accepted Answer

The interest rate wo...

Question 19

In macroeconomics, refers to the purchase of new capital.

Accepted Answer

The answer of In macroeconomics, refers to the purchase of...

Question 20

Stock in Frozen Dreams, an ice cream manufacturer, has a price to earnings ratio of 24. Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

Accepted Answer

Its price to earnings ratio is...

Exam 8: Saving, Investment, and the Financial System

When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures

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The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

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Banks

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The single most important piece of information about a stock is its

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Atlas Corporation is in sound financial condition. It sells a long-term bond. Which of the following make the interest rate on this bond lower than otherwise?

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Stock in Frozen Dreams, an ice cream manufacturer, has a price to earnings ratio of 24. Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

Correct AnswerverifiedIts price to earnings ratio is...View AnswerShow Answer

ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?

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Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

Correct AnswerverifiedShow Answer

Mandy purchases 68.2 shares of a mutual fund for $1,500. Cassie's purchase of these shares contributes $1,500 to which magnitude in the identity Y = C + I + G?

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If consumers reduced their spending, what would happen to the interest rate and investment?

Correct AnswerverifiedThe interest rate wo...View AnswerShow Answer

In macroeconomics, refers to the purchase of new capital.

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Other things the same, bonds are likely to have higher interest rates if they have

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A policy that induces people to save more shifts

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A larger budget surplus

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

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Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 26-4. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent, then the equilibrium real interest rate is

Correct AnswerverifiedShow Answer

A larger budget deficit

Correct AnswerverifiedShow Answer

Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Profits not paid out to stockholders are

Correct AnswerverifiedShow Answer

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Its price to earnings ratio is...
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The interest rate wo...
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