Question 1

At some point during the financial crisis of 2008-2009, people with uninsured deposits at financial institutions withdrew money from their accounts at those institutions. This phenomenon characterized which element of the financial crisis?

Accepted Answer

A)   the decline in confidence in financial institutions
B)   the credit crunch
C)   the economic downturn
D)   the decline in asset pricesE) B) and C)
F) A) and D)

Question 2

If the Apple corporation sells a bond it is

Accepted Answer

A)   borrowing directly from the public.
B)   borrowing indirectly from the public.
C)   selling shares of ownership directly to the public.
D)   selling shares of ownership indirectly to the public.E) B) and C)
F) A) and C)

Question 3

When tax code changes reduce saving incentives, the interest rate will _____ and investment will _____.

Accepted Answer

The answer of When tax code changes reduce saving incentives,...

Question 4

If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.

Accepted Answer

A) True 
 B)False

Question 5

National saving is equal to Y - T - C.

Accepted Answer

A) True 
 B)False

Question 6

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)   Y - C - G > 0.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 7

Which of the following would both make the interest rate on a bond higher than otherwise?

Accepted Answer

A)   the interest it pays is taxed and it is long term
B)   the interest it pays is taxed and it is short term
C)   the interest it pays is tax exempt and it is long term
D)   the interest it pays is tax exempt and it is short termE) B) and C)
F) None of the above

Question 8

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 9

If Congress instituted an investment tax credit

Accepted Answer

A)   it would make buying bonds more desirable, so the demand for loanable funds would shift.
B)   it would make buying capital goods more desirable, so the demand for loanable funds would shift.
C)   it would make buying bonds more desirable, so the supply of loanable funds would shift.
D)   it would make buying capital goods more desirable, so the supply of loanable funds would shift.E) A) and B)
F) A) and C)

Question 10

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

Question 11

Camp Company had total earnings of $600 million in 2013, out of which it retained 20 percent for future investments. In 2013, its stock featured a dividend yield of 4 percent and 100 million shares were outstanding. The price-earnings ratio for Camp Company stock was

Accepted Answer

A)   5.
B)   150.
C)   20.
D)   25.E) A) and C)
F) A) and B)

Question 12

Suppose that Congress were to institute an investment tax credit. What would happen in the market for loanable funds?

Accepted Answer

A)   The demand for loanable funds would shift left.
B)   The supply of loanable funds would shift left.
C)   The demand for loanable funds would shift right.
D)   The supply of loanable funds would shift right.E) A) and B)
F) None of the above

Question 13

If there is a shortage of loanable funds, then

Accepted Answer

A)   the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium.
B)   the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium.
C)   the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium.
D)   the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.E) A) and C)
F) B) and D)

Question 14

The Dow Jones Industrial Average has been computed regularly since

Accepted Answer

A)   1976.
B)   1948.
C)   1913.
D)   1896.E) B) and C)
F) B) and D)

Question 15

Which advantages)  do mutual funds claim to provide?

Accepted Answer

A)   diversification and access to the skills of professional money managers
B)   diversification but not access to the skills of professional money managers
C)   access to the skills of professional money managers but not diversification
D)   neither diversification nor access to the skills of professional money managers.E) C) and D)
F) A) and C)

Question 16

Suppose a country repealed its investment tax credit. The effects of this are represented by shifting the

Accepted Answer

A)   demand for and the supply of loanable funds to the right.
B)   demand for and the supply of loanable funds to the left.
C)   supply of loanable funds to the right and the demand for loanable funds to the left.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 17

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Accepted Answer

Robert is ...

Question 18

A creditor of a corporation holds

Accepted Answer

A)   bonds sold by the corporation. If the corporation experiences financial difficulties stock holders are paid before bond holders.
B)   bonds sold by the corporation. If the corporation experiences financial difficulties bond holders are paid before stock holders.
C)   stocks sold by the corporation. If the corporation experiences financial difficulties stock holders are paid before bond holders.
D)   stocks sold by the corporation. If the corporation experiences financial difficulties bond holders are paid before stock holders.E) All of the above
F) A) and D)

Question 19

When the U.S. government is in debt during a given year, it follows that its budget is in deficit for that year.

Accepted Answer

A) True 
 B)False

Question 20

In a closed economy, each unit of output is either consumed by households or invested.

Accepted Answer

A) True 
 B)False

Exam 13: Saving, Investment, and the Financial System

Suppose that Congress were to institute an investment tax credit. What would happen in the market for loanable funds?

Correct AnswerverifiedShow Answer

Suppose a country repealed its investment tax credit. The effects of this are represented by shifting the

Correct AnswerverifiedShow Answer

At some point during the financial crisis of 2008-2009, people with uninsured deposits at financial institutions withdrew money from their accounts at those institutions. This phenomenon characterized which element of the financial crisis?

Correct AnswerverifiedShow Answer

When tax code changes reduce saving incentives, the interest rate will _____ and investment will _____.

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

Which advantages) do mutual funds claim to provide?

Correct AnswerverifiedShow Answer

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Correct AnswerverifiedRobert is ...View AnswerShow Answer

The Dow Jones Industrial Average has been computed regularly since

Correct AnswerverifiedShow Answer

When the U.S. government is in debt during a given year, it follows that its budget is in deficit for that year.

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

If the Apple corporation sells a bond it is

Correct AnswerverifiedShow Answer

If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.

Correct AnswerverifiedShow Answer

Which of the following would both make the interest rate on a bond higher than otherwise?

Correct AnswerverifiedShow Answer

In a closed economy, each unit of output is either consumed by households or invested.

Correct AnswerverifiedShow Answer

If there is a shortage of loanable funds, then

Correct AnswerverifiedShow Answer

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

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National saving is equal to Y - T - C.

Correct AnswerverifiedShow Answer

A creditor of a corporation holds

Correct AnswerverifiedShow Answer

Camp Company had total earnings of $600 million in 2013, out of which it retained 20 percent for future investments. In 2013, its stock featured a dividend yield of 4 percent and 100 million shares were outstanding. The price-earnings ratio for Camp Company stock was

Correct AnswerverifiedShow Answer

If Congress instituted an investment tax credit

Correct AnswerverifiedShow Answer

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When tax code changes reduce saving incentives, the interest rate will _ and investment will _.

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Robert is ...
View Answer

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