Question 1

Buskin's Corporation has issued 2 million shares of stock. Its earnings were $10 million, of which it retained 40 percent. What was the dividend per share?

Accepted Answer

A)  $2.
B)  $3.
C)  $5.
D)  $8.E) A) and B)
F) A) and C)

Question 2

The country of Yokovia does not trade with any other country. Its GDP is $20 billion. Its government collects $2 billion in taxes. Consumption equals $15 billion and investment equals $2 billion. What is public saving in Yokovia, and what is the value of the goods and services purchased by the government of Yokovia?

Accepted Answer

A)  -$2 billion and $1 billion.
B)  $1 billion and $1 billion.
C)  -$1 billion and $3 billion.
D)  -$2 billion and $3 billion.E) None of the above
F) A) and B)

Question 3

Banks

Accepted Answer

A)  play a role in creating an asset that people can use as a medium of exchange.
B)  are financial intermediaries, but mutual funds are not financial intermediaries.
C)  are financial markets, as are bond markets.
D)  All of the above are correct.E) B) and C)
F) C) and D)

Question 4

A closed economy

Accepted Answer

A)  does not trade with other economies.
B)  is centrally-planned.
C)  does not allow financial intermediation.
D)  All of the above are correct.E) All of the above
F) C) and D)

Question 5

If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.

Accepted Answer

A)  These purchases are called capital investment. If you raise the funds to purchase them from others you are a saver.
B)  These purchases are called capital investment. If you raise the funds to purchase them from others you are a borrower.
C)  These purchases are called consumption. If you raise the funds to purchase them from others you are a saver.
D)  These purchases are called consumption. If you raise the funds to purchase them from others you are a borrower.E) A) and B)
F) A) and C)

Question 6

Which of the following statements is correct?

Accepted Answer

A)  The total income in the economy that remains after paying for consumption and government purchases is called private saving.
B)  The sum of private saving and national saving is called public saving.
C)  For a closed economy, the sum of private saving and public saving must equal investment.
D)  For a closed economy, the sum of consumption, national saving, and taxes must equal GDP.E) A) and C)
F) B) and C)

Question 7

A larger budget deficit

Accepted Answer

A)  raises the interest rate and investment.
B)  reduces the interest rate and investment.
C)  raises the interest rate and reduces investment.
D)  reduces the interest rate and raises investment.E) None of the above
F) C) and D)

Question 8

We would expect the interest rate on Bond A to be lower than the interest rate on Bond B if the two bonds have identical characteristics except that

Accepted Answer

A)  the credit risk associated with Bond A is lower than the credit risk associated with Bond B.
B)  Bond A was issued by the Apple corporation and Bond B was issued by the city of Houston.
C)  Bond A has a term of 20 years and Bond B has a term of 2 years.
D)  All of the above are correct.E) A) and B)
F) B) and C)

Question 9

In a closed economy, national saving equals

Accepted Answer

A)  investment.
B)  income minus the sum of consumption and government purchases.
C)  private saving plus public saving.
D)  All of the above are correct.E) B) and D)
F) B) and C)

Question 10

The fictional country of Alpetra increases the income tax rate so that tax revenues increase by​ $30 million. In response, consumption falls by $8 million. If GDP and government spending remains the same and Alpetra is a closed economy, what is the change in investment?

Accepted Answer

A)  ​Investment increases by $8 million.
B)  ​Investment decreases by $8 million.
C)  ​Investment increases by $38 million.
D)  ​Investment decreases by $22 million.E) A) and B)
F) None of the above

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.E) C) and D)
F) B) and C)

Question 12

Which of the two bonds in each example would you expect to generally pay the higher interest rate? Explain why.
a.a U.S. government bond or a Venezuelan government bond
b.a U.S. government bond or a municipal bond with the same term and issued by a creditworthy municipality.
c.a 6-month Treasury bill or a 20-year Treasury bond
d.a Microsoft bond or a bond issued by a new recording company

Accepted Answer

a.The Venezuelan government bond would l...

Question 13

Compared to stocks, bonds offer the holder

Accepted Answer

A)  lower risk and lower potential return.
B)  lower risk and higher potential return.
C)  higher risk and lower potential return.
D)  higher risk and higher potential return.E) A) and D)
F) A) and C)

Question 14

Bond A and Bond B have identical characteristics except that Bond A has a higher interest rate. Which bond has a higher credit risk?

Accepted Answer

The answer of Bond A and Bond B have identical...

Question 15

Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics?

Accepted Answer

A)  only Larry's
B)  only Curly Corporation's
C)  Larry's and Curly Corporation's
D)  neither Larry's nor Curly Corporation'sE) C) and D)
F) A) and B)

Question 16

Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

Accepted Answer

A)  $2 trillion, $2 trillion
B)  $2 trillion, $3 trillion
C)  $3 trillion, $3 trillion
D)  $4 trillion, $2 trillionE) A) and B)
F) A) and C)

Question 17

When a corporation experiences financial problems, bondholders are paid before stockholders.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is both a store of value and a common medium of exchange?

Accepted Answer

A)  corporate bonds
B)  mutual funds
C)  checking account balances
D)  All of the above are correct.E) B) and D)
F) A) and D)

Question 19

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

Accepted Answer

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

Question 20

Municipal bonds pay a relatively

Accepted Answer

A)  low rate of interest because of their high default risk and because the interest they pay is subject to federal income tax.
B)  low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.
C)  high rate of interest because of their high default risk and because federal taxes must be paid on the interest they pay.
D)  high rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.E) All of the above
F) A) and B)

Exam 26: Saving, Investment, and the Financial System

If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.

Correct Answer
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Correct Answer
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Compared to stocks, bonds offer the holder

Correct Answer
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The fictional country of Alpetra increases the income tax rate so that tax revenues increase by $30 million. In response, consumption falls by $8 million. If GDP and government spending remains the same and Alpetra is a closed economy, what is the change in investment?

Correct Answer
verified

Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics?

Correct Answer
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Which of the following is both a store of value and a common medium of exchange?

Correct Answer
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Retained earnings are

Correct Answer
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Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

Correct Answer
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Buskin's Corporation has issued 2 million shares of stock. Its earnings were $10 million, of which it retained 40 percent. What was the dividend per share?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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When a corporation experiences financial problems, bondholders are paid before stockholders.

Correct Answer
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A larger budget deficit

Correct Answer
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A closed economy

Correct Answer
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Banks

Correct Answer
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Correct Answer
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a.The Venezuelan government bond would l...
View Answer

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

Correct Answer
verified

We would expect the interest rate on Bond A to be lower than the interest rate on Bond B if the two bonds have identical characteristics except that

Correct Answer
verified

Municipal bonds pay a relatively

Correct Answer
verified

Bond A and Bond B have identical characteristics except that Bond A has a higher interest rate. Which bond has a higher credit risk?

Correct Answer
verified

In a closed economy, national saving equals

Correct Answer
verified

Exam 26: Saving, Investment, and the Financial System

If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Compared to stocks, bonds offer the holder

Correct AnswerverifiedShow Answer

The fictional country of Alpetra increases the income tax rate so that tax revenues increase by​ $30 million. In response, consumption falls by $8 million. If GDP and government spending remains the same and Alpetra is a closed economy, what is the change in investment?

Correct AnswerverifiedShow Answer

Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics?

Correct AnswerverifiedShow Answer

Which of the following is both a store of value and a common medium of exchange?

Correct AnswerverifiedShow Answer

Retained earnings are

Correct AnswerverifiedShow Answer

Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

Correct AnswerverifiedShow Answer

Buskin's Corporation has issued 2 million shares of stock. Its earnings were $10 million, of which it retained 40 percent. What was the dividend per share?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

When a corporation experiences financial problems, bondholders are paid before stockholders.

Correct AnswerverifiedShow Answer

A larger budget deficit

Correct AnswerverifiedShow Answer

A closed economy

Correct AnswerverifiedShow Answer

Banks

Correct AnswerverifiedShow Answer

Correct Answerverifieda.The Venezuelan government bond would l...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

We would expect the interest rate on Bond A to be lower than the interest rate on Bond B if the two bonds have identical characteristics except that

Correct AnswerverifiedShow Answer

Municipal bonds pay a relatively

Correct AnswerverifiedShow Answer

Bond A and Bond B have identical characteristics except that Bond A has a higher interest rate. Which bond has a higher credit risk?

Correct AnswerverifiedShow Answer

In a closed economy, national saving equals

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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The fictional country of Alpetra increases the income tax rate so that tax revenues increase by $30 million. In response, consumption falls by $8 million. If GDP and government spending remains the same and Alpetra is a closed economy, what is the change in investment?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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a.The Venezuelan government bond would l...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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