Question 1

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 supply curve from S1 to S2 is called

Accepted Answer

A)   an increase in the supply of loanable funds.
B)   an increase in the quantity of loanable funds supplied.
C)   a decrease in the supply of loanable funds.
D)   a decrease in the quantity of loanable funds supplied.E) A) and B)
F) None of the above

Question 2

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

Question 3

Other things the same, an increase in the interest rate

Accepted Answer

A)   would shift the demand for loanable funds to the right.
B)   would shift the demand for loanable funds to the left.
C)   would increase the quantity of loanable funds demanded.
D)   would decrease the quantity of loanable funds demanded.E) A) and D)
F) A) and B)

Question 4

Suppose private saving in a closed economy is $12b and investment is $10b.

Accepted Answer

A)   National saving must equal $12b.
B)   Public saving must equal $2b.
C)   The government budget surplus must equal $2b.
D)   The government budget deficit must equal $2b.E) None of the above
F) All of the above

Question 5

All financial intermediaries are financial institutions, but not all financial institutions are financial intermediaries.

Accepted Answer

A) True 
 B)False

Question 6

The financial system coordinates investment and saving, which are important determinants of long-run real GDP.

Accepted Answer

A) True 
 B)False

Question 7

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) A) and B)
F) A) and C)

Question 8

Credit risk refers to the probability that the issuer of a bond will fail to pay some or all of the interest or principal.

Accepted Answer

A) True 
 B)False

Question 9

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) A) and C)

Question 10

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) None of the above
F) C) and D)

Question 11

What does the maturity of a bond indicate?

Accepted Answer

The date a...

Question 12

A perpetuity is

Accepted Answer

A)   a financial intermediary that has existed throughout recorded history.
B)   an instrument of equity finance.
C)   a stock that pays dividends forever.
D)   a bond that pays interest forever.E) A) and B)
F) A) and C)

Question 13

Which of the following is a certificate of indebtedness?

Accepted Answer

A)   stocks and bonds
B)   stocks but not bonds
C)   bonds but not stocks
D)   neither stocks nor bondsE) B) and D)
F) None of the above

Question 14

A bond is a

Accepted Answer

A)   financial intermediary.
B)   certificate of indebtedness.
C)   certificate of partial ownership in an enterprise.
D)   None of the above is correct.E) A) and C)
F) A) and B)

Question 15

Table 26-2 
-Refer to Table 26-2. Which company had the lowest earnings per share?

Accepted Answer

A)   Boeing Co.
B)   Eli Lilly and Co.
C)   Kraft
D)   Kellogg Co.E) A) and D)
F) B) and C)

Question 16

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

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

Question 17

Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000 and taxes equal 3,000. What are private saving, public saving, and national saving?

Accepted Answer

A)   -2,000, 1,000, and 2,000, respectively.
B)   1,000, 2,000, and 3,000, respectively.
C)   2,000, -1,000, and 1,000, respectively.
D)   2,000, 1,000, and 2,000, respectively.E) A) and D)
F) B) and C)

Question 18

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect

Accepted Answer

A)   the demand for existing shares of stock in this company to decrease, so the price would fall.
B)   the demand for existing shares of stock in this company to increase, so the price would rise.
C)   the supply of existing shares of stock in this company to decrease, so the price would fall.
D)   the supply of existing shares of stock in this company to increase, so the price would rise.E) A) and B)
F) C) and D)

Question 19

Table 26-1 
-Refer to Table 26-1. In dollar terms, which company paid the highest dividend per share?

Accepted Answer

A)   GenMills
B)   Microsoft
C)   Graco
D)   HersheyE) C) and D)
F) A) and D)

Question 20

Which of the following is not correct?

Accepted Answer

A)   American families save a larger fraction of their incomes than their counterparts in many other countries such as Germany and Japan.
B)   Saving is an important long-run determinant of a nation's standard of living.
C)   A change in tax laws that encouraged greater saving would lower interest rates.
D)   Taxes on interest income can substantially decrease the future value of current saving.E) None of the above
F) A) and C)

Exam 26: Saving, Investment, and the Financial System

Which of the following is not correct?

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Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect

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All financial intermediaries are financial institutions, but not all financial institutions are financial intermediaries.

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Other things the same, an increase in the interest rate

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In a closed economy, private saving is

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A perpetuity is

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Suppose private saving in a closed economy is $12b and investment is $10b.

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

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Which of the following is a certificate of indebtedness?

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The financial system coordinates investment and saving, which are important determinants of long-run real GDP.

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Table 26-1 -Refer to Table 26-1. In dollar terms, which company paid the highest dividend per share?

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Table 26-2 -Refer to Table 26-2. Which company had the lowest earnings per share?

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

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What does the maturity of a bond indicate?

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Credit risk refers to the probability that the issuer of a bond will fail to pay some or all of the interest or principal.

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

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

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Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000 and taxes equal 3,000. What are private saving, public saving, and national saving?

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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 supply curve from S1 to S2 is called

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A bond is a

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The date a...
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