Question 1

A closed economy

Accepted Answer

A)   does not engage in international trade of goods and services.
B)   does not engage in international borrowing or lending.
C)   both A and B
D)   engages in international borrowing and lending.E) B) and D)
F) C) and D)

Question 2

The term crowding out refers to decreases in the interest rate caused by government budget surpluses.

Accepted Answer

A) True 
 B)False

Question 3

Ethan purchases a new house for $170,000. Ethan's purchase of the house contributes $170,000 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) All of the above
F) A) and B)

Question 4

Which of the following would shift the demand for loanable funds to the right?

Accepted Answer

A)   income tax increases
B)   government expenditures increase
C)   the interest rate falls
D)   Congress and the president pass an investment tax creditE) B) and C)
F) B) and D)

Question 5

In a closed economy taxes are $750 billion, government transfers are $400 billion, government expenditures are $500 billion, and investment is $400 billion. What are private saving, public saving and national saving?

Accepted Answer

Private saving is $550 billion...

Question 6

The identity that shows that total income and total expenditure are equal is

Accepted Answer

A)   GDP = Y.
B)   Y = DI + T + NX.
C)   GDP = GNP - NX.
D)   Y = C + I + G + NX.E) A) and B)
F) B) and C)

Question 7

If Congress increased the tax rate on interest income, investment

Accepted Answer

A)   would increase and saving would decrease.
B)   would decrease and saving would increase.
C)   and saving would increase.
D)   and saving would decrease.E) A) and B)
F) A) and C)

Question 8

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

Question 9

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.E) None of the above
F) A) and B)

Question 10

Which of the following lists correctly identifies the four expenditure categories of GDP?

Accepted Answer

A)   consumption, government purchases, investment, net-exports
B)   consumption, investment, depreciation, net-exports
C)   consumption, saving, investment, depreciation,
D)   consumption, government purchases, investment, savingsE) A) and B)
F) None of the above

Question 11

In national income accounting, we use which of the following pairs of terms interchangeably?

Accepted Answer

A)   "investment" and "private saving"
B)   "investment" and "purchases of stocks and bonds"
C)   "saving" and "national saving"
D)   "public saving" and "government tax revenue minus government spending"E) C) and D)
F) A) and D)

Question 12

If a reform of the tax laws encourages greater saving, the result would be

Accepted Answer

A)   higher interest rates and greater investment.
B)   higher interest rates and less investment.
C)   lower interest rates and greater investment.
D)   lower interest rate and less investment.E) A) and B)
F) A) and C)

Question 13

The first three elements of a financial crisis are correctly represented as taking place in the following order:

Accepted Answer

A)   large decline in some asset prices → insolvencies at financial institutions → decline in confidence in financial institutions
B)   insolvencies at financial institutions → decline in confidence in financial institutions → large decline in some asset prices
C)   insolvencies at financial institutions → economic downturn → credit crunch
D)   insolvencies at financial institutions → credit crunch → economic downturnE) C) and D)
F) B) and D)

Question 14

Which of the following is included in the demand for loanable funds?

Accepted Answer

A)   investment and government borrowing
B)   investment but not government borrowing
C)   government borrowing but not investment
D)   neither government borrowing nor investmentE) B) and C)
F) None of the above

Question 15

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 C)
F) All of the above

Question 16

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

Accepted Answer

A)   there is a surplus and the interest rate is above the equilibrium level.
B)   there is a surplus and the interest rate is below the equilibrium level.
C)   there is a shortage and the interest rate is above the equilibrium level.
D)   there is a shortage and the interest rate is below the equilibrium level.E) A) and D)
F) All of the above

Question 17

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) None of the above
F) A) and B)

Question 18

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium.
 
-Refer to Table 26-3. Determine the quantity of loanable funds demanded.

Accepted Answer

A)   $1.8 trillion
B)   $1.6 trillion
C)   $1.4 trillion
D)   $0.8 trillionE) All of the above
F) C) and D)

Question 19

What is a bond buyer promised when she buys a bond?

Accepted Answer

The answer of What is a bond buyer promised when...

Question 20

Figure 26-5. Figure 26-5 shows the loanable funds market for a closed economy. 
-Refer to Figure 26-5. Starting at point A, the enactment of an investment tax credit would likely cause

Accepted Answer

A)   the quantity of loanable funds traded to increase to $125 and the interest rate to rise to 7% point 
C)  .
B)   the quantity of loanable funds traded to decrease to $75 and the interest rate to fall to 5% point 
B)  .
C)   the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to 7% point 
E)  .
D)   the quantity of loanable funds traded to increase to $125 and the interest rate to fall to 5% point 
D)  .E) A) and B)
F) A) and C)

Exam 13: Saving, Investment, and the Financial System

The identity that shows that total income and total expenditure are equal is

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The first three elements of a financial crisis are correctly represented as taking place in the following order:

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Which of the following would shift the demand for loanable funds to the right?

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Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. -Refer to Table 26-3. Determine the quantity of loanable funds demanded.

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What is a bond buyer promised when she buys a bond?

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

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The term crowding out refers to decreases in the interest rate caused by government budget surpluses.

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In a closed economy taxes are $750 billion, government transfers are $400 billion, government expenditures are $500 billion, and investment is $400 billion. What are private saving, public saving and national saving?

Correct AnswerverifiedPrivate saving is $550 billion...View AnswerShow Answer

A closed economy

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Ethan purchases a new house for $170,000. Ethan's purchase of the house contributes $170,000 to which magnitude in the identity Y = C + I + G?

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A perpetuity is distinguished from other bonds in that it

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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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Which of the following statements is correct?

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Figure 26-5. Figure 26-5 shows the loanable funds market for a closed economy. -Refer to Figure 26-5. Starting at point A, the enactment of an investment tax credit would likely cause

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If Congress increased the tax rate on interest income, investment

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Which of the following lists correctly identifies the four expenditure categories of GDP?

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

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In national income accounting, we use which of the following pairs of terms interchangeably?

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If a reform of the tax laws encourages greater saving, the result would be

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Which of the following is included in the demand for loanable funds?

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Private saving is $550 billion...
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