Question 1

Other things the same, bonds are likely to have higher interest rates if they have

Accepted Answer

A)  tax exemptions and short terms.
B)  tax exemptions and long terms.
C)  no tax exemptions and short terms.
D)  no tax exemptions and long terms.E) A) and B)
F) A) and C)

Question 2

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit. What would happen to the interest rate?

Accepted Answer

A)  It would decrease.
B)  It would increase.
C)  It would stay the same.
D)  It might do any of the above.E) A) and C)
F) None of the above

Question 3

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

Accepted Answer

A)  -500
B)  0
C)  2,000
D)  None of the above is correct.E) None of the above
F) A) and B)

Question 4

Which of the following would likely make the interest rate on a bond higher than otherwise?

Accepted Answer

A)  both high credit risk and a long term
B)  high credit risk but not a long term
C)  a long term but not a high credit risk
D)  neither high credit risk nor a long termE) C) and D)
F) B) and C)

Question 5

As a money management fee, mutual funds usually charge their customers

Accepted Answer

A)  between 0.5 and 2.0 percent of assets each year.
B)  between 1.5 and 3.0 percent of assets each year.
C)  nothing, because they receive commissions from the firms whose stock they buy.
D)  a flat fee of about $50.E) B) and C)
F) A) and B)

Question 6

The slope of the supply of loanable funds curve represents the

Accepted Answer

A)  positive relation between the real interest rate and investment.
B)  positive relation between the real interest rate and saving.
C)  negative relation between the real interest rate and investment.
D)  negative relation between the real interest rate and saving.E) All of the above
F) None of the above

Question 7

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

Question 8

A corporation's earnings are

Accepted Answer

A)  the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants minus the dividends paid out.
B)  the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists minus the dividends paid out.
C)  the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants.
D)  the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists.E) C) and D)
F) A) and C)

Question 9

When an economy's government goes from running a budget deficit to running a budget surplus, the economy's long-run growth prospects are improved.

Accepted Answer

A) True 
 B)False

Question 10

The indirect provision of funds by savers to borrowers is accomplished by

Accepted Answer

A)  banks and other financial markets.
B)  banks and other financial intermediaries.
C)  stock markets and other financial markets.
D)  All of the above are correct.E) A) and D)
F) A) and C)

Question 11

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $4 billion worth of goods and services each year, collects $6 billion in taxes, and provides $1 billion in transfer payments to households. Private saving in Cedarland is $4 billion. For Cedarland,

Accepted Answer

A)  investment is $6 billion and consumption is $9 billion.
B)  investment is $6 billion and consumption is $8 billion.
C)  investment is $5 billion and consumption is $8 billion.
D)  investment is $5 billion and consumption is $7 billion.E) A) and B)
F) C) and D)

Question 12

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,

Accepted Answer

A)  invest in physical capital.
B)  use equity finance.
C)  sell bonds.
D)  purchase bonds.E) None of the above
F) B) and D)

Question 13

If the tax revenue of the federal government exceeds spending, then the government necessarily

Accepted Answer

A)  runs a budget deficit.
B)  runs a budget surplus.
C)  runs a national debt.
D)  will increase taxes.E) All of the above
F) None of the above

Question 14

National saving is equal to Y - T - C.

Accepted Answer

A) True 
 B)False

Question 15

In the market for loanable funds, the interaction of the demand for, and supply of, loanable funds determines the equilibrium level of

Accepted Answer

A)  the inflation rate.
B)  gross domestic product.
C)  the real interest rate.
D)  the nominal interest rate.E) B) and D)
F) None of the above

Question 16

Which of the following statements is correct?

Accepted Answer

A)  NASDAQ is an important stock exchange in the United States.
B)  The Standard & Poor's 500 Index and the New York Stock Exchange are two examples of stock indexes.
C)  The most significant influence on the demand for a corporation's stock is the number of shares of the stock that the corporation has issued.
D)  All of the above are correct.E) A) and B)
F) All of the above

Question 17

If the government's expenditures exceeded its receipts, it would likely

Accepted Answer

A)  lend money to a bank or other financial intermediary.
B)  borrow money from a bank or other financial intermediary.
C)  buy bonds directly from the public.
D)  sell bonds directly to the public.E) A) and B)
F) None of the above

Question 18

Public saving is equal to national saving minus private saving.

Accepted Answer

A) True 
 B)False

Question 19

Other things being constant, when a firm sells new shares of stock, the

Accepted Answer

A)  supply of the stock increases and the price decreases.
B)  supply of the stock decreases and the price increases.
C)  demand for the stock increases and the price increases.
D)  demand for the stock decreases and the price decreases.E) A) and D)
F) None of the above

Question 20

In a closed economy, what does (T - G)  represent?

Accepted Answer

A)  national saving
B)  investment
C)  private saving
D)  public savingE) A) and B)
F) A) and C)

Exam 13: Saving, Investment, and the Financial System

When an economy's government goes from running a budget deficit to running a budget surplus, the economy's long-run growth prospects are improved.

Correct Answer
verified

If the government's expenditures exceeded its receipts, it would likely

Correct Answer
verified

As a money management fee, mutual funds usually charge their customers

Correct Answer
verified

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit. What would happen to the interest rate?

Correct Answer
verified

Which of the following would likely make the interest rate on a bond higher than otherwise?

Correct Answer
verified

Public saving is equal to national saving minus private saving.

Correct Answer
verified

Other things the same, bonds are likely to have higher interest rates if they have

Correct Answer
verified

Other things being constant, when a firm sells new shares of stock, the

Correct Answer
verified

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

Correct Answer
verified

In a closed economy, what does (T - G) represent?

Correct Answer
verified

National saving is equal to Y - T - C.

Correct Answer
verified

The indirect provision of funds by savers to borrowers is accomplished by

Correct Answer
verified

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

If the tax revenue of the federal government exceeds spending, then the government necessarily

Correct Answer
verified

A corporation's earnings are

Correct Answer
verified

The slope of the supply of loanable funds curve represents the

Correct Answer
verified

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

In the market for loanable funds, the interaction of the demand for, and supply of, loanable funds determines the equilibrium level of

Correct Answer
verified

Exam 13: Saving, Investment, and the Financial System

When an economy's government goes from running a budget deficit to running a budget surplus, the economy's long-run growth prospects are improved.

Correct AnswerverifiedShow Answer

If the government's expenditures exceeded its receipts, it would likely

Correct AnswerverifiedShow Answer

As a money management fee, mutual funds usually charge their customers

Correct AnswerverifiedShow Answer

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit. What would happen to the interest rate?

Correct AnswerverifiedShow Answer

Which of the following would likely make the interest rate on a bond higher than otherwise?

Correct AnswerverifiedShow Answer

Public saving is equal to national saving minus private saving.

Correct AnswerverifiedShow Answer

Other things the same, bonds are likely to have higher interest rates if they have

Correct AnswerverifiedShow Answer

Other things being constant, when a firm sells new shares of stock, the

Correct AnswerverifiedShow Answer

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

Correct AnswerverifiedShow Answer

In a closed economy, what does (T - G) represent?

Correct AnswerverifiedShow Answer

National saving is equal to Y - T - C.

Correct AnswerverifiedShow Answer

The indirect provision of funds by savers to borrowers is accomplished by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If the tax revenue of the federal government exceeds spending, then the government necessarily

Correct AnswerverifiedShow Answer

A corporation's earnings are

Correct AnswerverifiedShow Answer

The slope of the supply of loanable funds curve represents the

Correct AnswerverifiedShow Answer

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

In the market for loanable funds, the interaction of the demand for, and supply of, loanable funds determines the equilibrium level of

Correct AnswerverifiedShow Answer

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