Question 1

An increase in the interest rate causes a decrease in investment by shifting the loanable funds demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 2

You receive an email from a firm proposing the following business deal.The firm will send you $1 000 now,and in exchange you will send it $1 100 in 1 year.You will just break,even if the annual interest rate is _____%.

Accepted Answer

A)   12
B)   4
C)   6
D)   10

Question 3

Which index includes the most companies and provides the broadest measure of stock market performance?

Accepted Answer

A)   the Dow Jones Industrial Average
B)   the producer price index
C)   S&P/TSX Composite Index
D)   the NASDAQ

Question 4

Which item qualifies as an asset from the viewpoint of a household?

Accepted Answer

A)   a house
B)   a mortgage
C)   credit card debt
D)   a car loan

Question 5

A liability is:

Accepted Answer

A)   having wronged someone and being held responsible in court.
B)   a requirement to pay in the future.
C)   the inability to perform an agreed task.
D)   the requirement that banks offer insurance to depositors.

Question 6

In an open economy,government spending was $30 billion,consumption was $70 billion,taxes were $20 billion,GDP was $100 billion,and investment spending was $10 billion.As a result,there was:

Accepted Answer

A)   a net capital inflow of $10 billion.
B)   capital inflows of $10 billion and capital outflows of $20 billion.
C)   a trade surplus of $20 billion and a financial deficit of $20 billion.
D)   a net capital outflow of $10 billion.

Question 7

Use the following to answer questions: 
-(Table: Investment Projects) Use Table: Investment Projects.If the market interest rate declines from 15% to 13%,then the amount of investment demanded will increase by:

Accepted Answer

A)   $200.
B)   $1 000.
C)   $2 000.
D)   $2 200.

Question 8

Private savings equals:

Accepted Answer

A)   income after taxes minus consumption.
B)   taxes minus government spending on goods and services.
C)   the total amount of savings accounts plus stocks plus bonds owned by households.
D)   income plus investment.

Question 9

Use the following to answer questions: 
-(Figure: Loanable Funds Market II) Use Figure: Loanable Funds Market II.Other things being equal,an increase in taxes on savings and investment income will shift _____ to the _____ and _____ the interest rate.

Accepted Answer

A)   demand;right;increase
B)   demand;left;decrease
C)   supply;right;decrease
D)   supply;left;increase

Question 10

A mutual fund:

Accepted Answer

A)   always includes a base year.
B)   owns a diversified portfolio.
C)   always earns a profit.
D)   offers a lower rate of return for any given level of risk.

Question 11

By doing research on the companies in their portfolios,mutual funds reduce transactions costs for their investors.

Accepted Answer

A) True 
 B)False

Question 12

The domestic supply of loanable funds is _____ sloping because _____ respond to lower interest rates by _____ their quantity supplied of loanable funds.

Accepted Answer

A)   upward;savers;increasing
B)   upward;investors;decreasing
C)   upward;savers;decreasing
D)   downward;investors;increasing

Question 13

When expected inflation was high during the 1970s,interest rates were low.

Accepted Answer

A) True 
 B)False

Question 14

A relatively low saving rate affects productivity growth by:

Accepted Answer

A)   causing a shortage of funds for investment in physical capital.
B)   decreasing consumption spending and increasing investment in human capital.
C)   reducing the tax base and preventing the government from providing public goods.
D)   stimulating imports and increasing the trade deficit.

Question 15

A government has a budget deficit in an open economy.This means that:

Accepted Answer

A)   the government is spending less than its tax revenue.
B)   exports minus imports are zero.
C)   exports minus imports are positive.
D)   the government is spending more than its tax revenue.

Question 16

Use the following to answer questions: 
-(Figure: Loanable Funds Market II) Use Figure: Loanable Funds Market II.An increase in government borrowing will shift the domestic demand for loanable funds to the _____ and _____ the interest rate.

Accepted Answer

A)   left;increase
B)   left;decrease
C)   right;increase
D)   right;decrease

Question 17

Use the following to answer questions: 
-(Table: The National Income Accounts) Use Table: National Income Accounts.The value of national savings is:

Accepted Answer

A)   $15.9 trillion.
B)   $4.9 trillion.
C)   $2.1 trillion.
D)   $1.6 trillion.

Question 18

Financial assets with the HIGHEST risk are:

Accepted Answer

A)   stocks.
B)   Canadian government bonds.
C)   bonds.
D)   bank deposits.

Question 19

A bank loan is a(n) _____ to the borrower and a(n) _____ to the bank.

Accepted Answer

A)   asset;liability
B)   asset;asset
C)   liability;liability
D)   liability;asset

Question 20

National savings is the sum of private savings and:

Accepted Answer

A)   private consumption.
B)   government tax revenue.
C)   the budget balance.
D)   trade surplus.

Exam 10: Savings, Investment Spending, and the Financial System

Use the following to answer questions: -(Figure: Loanable Funds Market II) Use Figure: Loanable Funds Market II.Other things being equal,an increase in taxes on savings and investment income will shift _____ to the _____ and _____ the interest rate.

Correct AnswerverifiedShow Answer

You receive an email from a firm proposing the following business deal.The firm will send you $1 000 now,and in exchange you will send it $1 100 in 1 year.You will just break,even if the annual interest rate is _____%.

Correct AnswerverifiedShow Answer

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects.If the market interest rate declines from 15% to 13%,then the amount of investment demanded will increase by:

Correct AnswerverifiedShow Answer

Financial assets with the HIGHEST risk are:

Correct AnswerverifiedShow Answer

Private savings equals:

Correct AnswerverifiedShow Answer

A relatively low saving rate affects productivity growth by:

Correct AnswerverifiedShow Answer

An increase in the interest rate causes a decrease in investment by shifting the loanable funds demand curve to the left.

Correct AnswerverifiedShow Answer

A liability is:

Correct AnswerverifiedShow Answer

Which index includes the most companies and provides the broadest measure of stock market performance?

Correct AnswerverifiedShow Answer

A bank loan is a(n) _____ to the borrower and a(n) _____ to the bank.

Correct AnswerverifiedShow Answer

When expected inflation was high during the 1970s,interest rates were low.

Correct AnswerverifiedShow Answer

National savings is the sum of private savings and:

Correct AnswerverifiedShow Answer

In an open economy,government spending was $30 billion,consumption was $70 billion,taxes were $20 billion,GDP was $100 billion,and investment spending was $10 billion.As a result,there was:

Correct AnswerverifiedShow Answer

A government has a budget deficit in an open economy.This means that:

Correct AnswerverifiedShow Answer

Use the following to answer questions: -(Table: The National Income Accounts) Use Table: National Income Accounts.The value of national savings is:

Correct AnswerverifiedShow Answer

Which item qualifies as an asset from the viewpoint of a household?

Correct AnswerverifiedShow Answer

The domestic supply of loanable funds is _____ sloping because _____ respond to lower interest rates by _____ their quantity supplied of loanable funds.

Correct AnswerverifiedShow Answer

By doing research on the companies in their portfolios,mutual funds reduce transactions costs for their investors.

Correct AnswerverifiedShow Answer

Use the following to answer questions: -(Figure: Loanable Funds Market II) Use Figure: Loanable Funds Market II.An increase in government borrowing will shift the domestic demand for loanable funds to the _____ and _____ the interest rate.

Correct AnswerverifiedShow Answer

A mutual fund:

Correct AnswerverifiedShow Answer

Use the following to answer questions: -(Figure: Loanable Funds Market II) Use Figure: Loanable Funds Market II.Other things being equal,an increase in taxes on savings and investment income will shift ___ to the _ and ___ the interest rate.

Correct Answer
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A bank loan is a(n) _ to the borrower and a(n) _ to the bank.

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The domestic supply of loanable funds is ___ sloping because _ respond to lower interest rates by ___ their quantity supplied of loanable funds.

Correct Answer
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Use the following to answer questions: -(Figure: Loanable Funds Market II) Use Figure: Loanable Funds Market II.An increase in government borrowing will shift the domestic demand for loanable funds to the _ and _ the interest rate.

Correct Answer
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