Question 1

The sale of stocks

Accepted Answer

A)   and bonds to raise money is called debt finance.
B)   and bonds to raise money is called equity finance.
C)   to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance.
D)   to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.

Question 2

If the demand for loanable funds shifts to the right, then the equilibrium interest rate

Accepted Answer

A)   and quantity of loanable funds rises.
B)   and quantity of loanable funds falls.
C)   rises and the quantity of loanable funds falls.
D)   falls and the quantity of loanable funds rises.

Question 3

The sale of either stocks or bonds to raise money is known as equity finance.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following are financial intermediaries?

Accepted Answer

A)   both banks and mutual funds
B)   banks but not mutual funds
C)   mutual funds but not banks
D)   neither banks or mutual funds

Question 5

We associate the term debt finance with

Accepted Answer

A)   the bond market, and we associate the term equity finance with the stock market.
B)   the stock market, and we associate the term equity finance with the bond market.
C)   financial intermediaries, and we associate the term equity finance with financial markets.
D)   financial markets, and we associate the term equity finance with financial intermediaries.

Question 6

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Accepted Answer

Investment spending ...

Question 7

Consider three different closed economies with the following national income statistics. Country A has taxes of $40 billion, transfers of $20 billion, and government expenditures on goods and services of $30 billion. County B has private savings of $60 billion, and investment expenditures of $40 billion. Country C has GDP of $300 billion, investment of $90, consumption of $180 billion, taxes of $60 billion and transfers of $20 billion. From this information, we know that

Accepted Answer

A)   country A has the largest government budget deficit.
B)   country B has the largest government budget deficit.
C)   country C has the largest government budget deficit.
D)   The government budget deficit is equal in all three countries.

Question 8

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 trillion

Question 9

If in the past Congress had taken additional actions to make saving more rewarding, then today it is likely that the equilibrium interest rate

Accepted Answer

A)   and the equilibrium quantity of loanable funds both would be lower.
B)   and the equilibrium quantity of loanable funds both would be higher.
C)   would be higher and the equilibrium quantity of loanable funds would be lower.
D)   would be lower and the equilibrium quantity of loanable funds would be higher.

Question 10

Which of the following is not always correct for a closed economy?

Accepted Answer

A)   National saving equals private saving plus public saving.
B)   Net exports equal zero.
C)   Real GDP measures both income and expenditures.
D)   Private saving equals investment.

Question 11

Retained earnings are

Accepted Answer

A)   earnings of a company that are not paid out to stockholders.
B)   the amount of revenue a corporation receives for the sale of its products minus its costs of production as measured by its accountants.
C)   the single most important piece of information about a stock.
D)   computed by multiplying the dividend yield by the price of the stock.

Question 12

The slope of the supply of loanable funds is based on the logic that an increase in interest rates

Accepted Answer

A)   makes saving more attractive.
B)   makes saving less attractive.
C)   makes investment more attractive.
D)   makes investment less attractive.

Question 13

Which of the following is correct?

Accepted Answer

A)   The maturity of a bond refers to the amount to be paid back.
B)   The principal of the bond refers to the person selling the bond.
C)   A bond buyer cannot sell a bond before it matures.
D)   None of the above is correct.

Question 14

A checking deposit functions as

Accepted Answer

A)   a medium of exchange and as a store of value.
B)   a medium of exchange, but not as a store of value.
C)   a store of value, but not as a medium of exchange.
D)   neither a medium of exchange nor as a store of value.

Question 15

If there is shortage of loanable funds, then

Accepted Answer

A)   the supply for loanable funds shifts right and the demand shifts left.
B)   the supply for loanable funds shifts left and the demand shifts right.
C)   neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium.
D)   neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

Question 16

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 26-3. What, specifically, does the label on the vertical axis, i, represent?

Accepted Answer

A)   the nominal interest rate
B)   the real interest rate
C)   the inflation rate
D)   the dividend yield

Question 17

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders. This failure is referred to as a

Accepted Answer

A)   breach.
B)   default.
C)   risk.
D)   term failure.

Question 18

On a graph that depicts the market for loanable funds, the nominal interest rate is measured along the vertical axis.

Accepted Answer

A) True 
 B)False

Question 19

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.

Question 20

Which of the following is not correct?

Accepted Answer

A)   If you buy a bond from a corporation, you can sell the bond to someone else before it matures.
B)   Term refers to the scheduling of periodic interest rate payments on a bond.
C)   A bond is an IOU.
D)   There are millions of different bonds in the U.S. economy.

Exam 8: Saving, Investment, and the Financial System

If the demand for loanable funds shifts to the right, then the equilibrium interest rate

Correct Answer
verified

The slope of the supply of loanable funds is based on the logic that an increase in interest rates

Correct Answer
verified

Which of the following is not correct?

Correct Answer
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We associate the term debt finance with

Correct Answer
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Which of the following is correct?

Correct Answer
verified

If there is shortage of loanable funds, then

Correct Answer
verified

Which of the following is not always correct for a closed economy?

Correct Answer
verified

The sale of stocks

Correct Answer
verified

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. What, specifically, does the label on the vertical axis, i, represent?

Correct Answer
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Retained earnings are

Correct Answer
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Correct Answer
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The sale of either stocks or bonds to raise money is known as equity finance.

Correct Answer
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A checking deposit functions as

Correct Answer
verified

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders. This failure is referred to as a

Correct Answer
verified

Which of the following are financial intermediaries?

Correct Answer
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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?

Correct Answer
verified

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Correct Answer
verified
Investment spending ...
View Answer

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.

Correct Answer
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On a graph that depicts the market for loanable funds, the nominal interest rate is measured along the vertical axis.

Correct Answer
verified

If in the past Congress had taken additional actions to make saving more rewarding, then today it is likely that the equilibrium interest rate

Correct Answer
verified

Exam 8: Saving, Investment, and the Financial System

If the demand for loanable funds shifts to the right, then the equilibrium interest rate

Correct AnswerverifiedShow Answer

The slope of the supply of loanable funds is based on the logic that an increase in interest rates

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

We associate the term debt finance with

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

If there is shortage of loanable funds, then

Correct AnswerverifiedShow Answer

Which of the following is not always correct for a closed economy?

Correct AnswerverifiedShow Answer

The sale of stocks

Correct AnswerverifiedShow Answer

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. What, specifically, does the label on the vertical axis, i, represent?

Correct AnswerverifiedShow Answer

Retained earnings are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The sale of either stocks or bonds to raise money is known as equity finance.

Correct AnswerverifiedShow Answer

A checking deposit functions as

Correct AnswerverifiedShow Answer

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders. This failure is referred to as a

Correct AnswerverifiedShow Answer

Which of the following are financial intermediaries?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Correct AnswerverifiedInvestment spending ...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

On a graph that depicts the market for loanable funds, the nominal interest rate is measured along the vertical axis.

Correct AnswerverifiedShow Answer

If in the past Congress had taken additional actions to make saving more rewarding, then today it is likely that the equilibrium interest rate

Correct AnswerverifiedShow Answer

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Investment spending ...
View Answer

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