Question 1

Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 500. What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?

Accepted Answer

A)   1,500, deficit
B)   1,500, surplus
C)   1,000, deficit
D)   1,000, surplus

Question 2

Which government policy raises the interest rate and raises investment spending?

Accepted Answer

An investm...

Question 3

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $100,000 and the quantity of loanable funds supplied is $100,000. Currently, the nominal interest rate is 6 percent and the inflation rate is 2 percent. Currently,

Accepted Answer

A)   the market for loanable funds is in equilibrium.
B)   the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise.
C)   the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall.
D)   the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise.

Question 4

In the loanable funds model, an increase in an investment tax credit would create a

Accepted Answer

A)   shortage at the former equilibrium interest rate. This shortage would lead to a rise in the interest rate.
B)   shortage at the former equilibrium interest rate. This shortage would lead to a fall in the interest rate.
C)   surplus at the former equilibrium interest rate. This surplus would lead to a rise in the interest rate.
D)   surplus at the former equilibrium interest rate. This surplus would lead to a fall in the interest rate.

Question 5

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. 
-Refer to Figure 26-2. What is measured along the horizontal axis of the graph?

Accepted Answer

A)   the quantity of loanable funds
B)   the size of the government budget deficit or surplus
C)   the real interest rate
D)   the nominal interest rate

Question 6

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

Accepted Answer

A)   corporate bond, municipal bond, U.S. government bond
B)   corporate bond, U.S. government bond, municipal bond
C)   municipal bond, U.S. government bond, corporate bond
D)   U.S. government bond, municipal bond, corporate bond

Question 7

Which of the following would necessarily increase the equilibrium interest rate?

Accepted Answer

A)   The demand for and the supply of loanable funds shift right.
B)   The demand for and the supply of loanable funds shift left.
C)   The demand for loanable funds shifts right and the supply of loanable funds shifts left.
D)   The demand for loanable funds shifts left and the supply of loanable funds shifts right.

Question 8

If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal interest rate is

Accepted Answer

A)   3.5 percent.
B)   5 percent.
C)   9 percent
D)   7 percent.

Question 9

In the national income accounting identity showing the equality between national saving and investment, what are the algebraic expressions for private saving and public saving?

Accepted Answer

Private saving is Y ...

Question 10

In a closed economy, public saving is the amount of

Accepted Answer

A)   income that households have left after paying for taxes and consumption.
B)   income that businesses have left after paying for the factors of production.
C)   tax revenue that the government has left after paying for its spending.
D)   spending that the government undertakes in excess of the taxes it collects.

Question 11

Use the following table to answer the following questions.
Table 26-1
 
-Refer to Table 26-1. What was Hershey's earnings per share?

Accepted Answer

A)   $29.90
B)   $2.79
C)   $1.50
D)   $0.36

Question 12

Which of the following statements is correct?

Accepted Answer

A)   The interest rate that is usually reported is the interest rate that has been corrected for inflation.
B)   The supply of, and demand for, loanable funds depend on the real rather than nominal)  interest rate.
C)   If the nominal interest rate has decreased and the real interest rate has also decreased, then the inflation rate must have decreased as well.
D)   All of the above are correct.

Question 13

Alpha Corporation has a price of $5 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio which is

Accepted Answer

A)   high, perhaps indicating that people expect future earnings to rise.
B)   high, perhaps indicating that people expect future earnings to fall.
C)   low, perhaps indicating that people expect future earnings to rise.
D)   low, perhaps indicating that people expect future earnings to fall.

Question 14

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.

Question 15

Generally, if people begin to expect a company to have higher future profits, the price of the company's stock will begin to decrease.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Public saving is the difference between and .

Accepted Answer

tax revenue, governm...

Question 18

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 bonds

Question 19

Suppose government expenditures on goods and services increase, transfers are unchanged, and taxes rise by less than the increase in expenditures. These changes in the government's budget cause

Accepted Answer

A)   both the equilibrium interest rate and the equilibrium quantity of loanable funds to fall.
B)   both the equilibrium interest rate and the equilibrium quantity of loanable funds to rise.
C)   the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to fall.
D)   the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to rise.

Question 20

The financial system is important because it helps to match one person's with another person's .

Accepted Answer

The answer of The financial system is important because it...

Exam 13: Saving, Investment, and the Financial System

In the loanable funds model, an increase in an investment tax credit would create a

Correct AnswerverifiedShow Answer

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $100,000 and the quantity of loanable funds supplied is $100,000. Currently, the nominal interest rate is 6 percent and the inflation rate is 2 percent. Currently,

Correct AnswerverifiedShow Answer

Which government policy raises the interest rate and raises investment spending?

Correct AnswerverifiedAn investm...View AnswerShow Answer

Generally, if people begin to expect a company to have higher future profits, the price of the company's stock will begin to decrease.

Correct AnswerverifiedShow Answer

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

Correct AnswerverifiedShow Answer

Public saving is the difference between and .

Correct Answerverifiedtax revenue, governm...View AnswerShow Answer

The financial system is important because it helps to match one person's with another person's .

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In the national income accounting identity showing the equality between national saving and investment, what are the algebraic expressions for private saving and public saving?

Correct AnswerverifiedPrivate saving is Y ...View AnswerShow Answer

Which of the following statements is correct?

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Which of the following is a certificate of indebtedness?

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In a closed economy, public saving is the amount of

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Suppose government expenditures on goods and services increase, transfers are unchanged, and taxes rise by less than the increase in expenditures. These changes in the government's budget cause

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

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Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 500. What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?

Correct AnswerverifiedShow Answer

Which of the following would necessarily increase the equilibrium interest rate?

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If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal interest rate is

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Use the following table to answer the following questions. Table 26-1 -Refer to Table 26-1. What was Hershey's earnings per share?

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Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. -Refer to Figure 26-2. What is measured along the horizontal axis of the graph?

Correct AnswerverifiedShow Answer

Alpha Corporation has a price of $5 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio which is

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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An investm...
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tax revenue, governm...
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Private saving is Y ...
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