Question 1

Which of the following equations represents GDP for a closed economy?

Accepted Answer

A)   Y = C + I + G + T
B)   S = I - G
C)   I = Y - C + G
D)   Y = C + I + GE) C) and D)
F) A) and D)

Question 2

Institutions that help to match one person's saving with another person's investment are collectively called the

Accepted Answer

A)   Federal Reserve system.
B)   banking system.
C)   monetary system.
D)   financial system.E) A) and D)
F) B) and C)

Question 3

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.E) A) and B)
F) None of the above

Question 4

Your brother-in-law wants to buy either stock or bonds in Cedar Valley Furniture,which manufactures wooden furniture.He wants your advice on whether to buy stock or bonds.Explain how each of his quotes below should affect his choice between the stock and the bond.
a.
"I have reason to believe that people are soon going to find rocking chairs have health benefits."
b.
"I would like to tell people I am part owner of Cedar Valley Furniture."
c.
"I do not want to take on much risk."

Accepted Answer

a.
Presumably,when this happens,unless e...

Question 5

When a country saves a larger portion of its GDP than it did before,it will have

Accepted Answer

A)   more capital and higher productivity.
B)   more capital and lower productivity.
C)   less capital and higher productivity.
D)   less capital and lower productivity.E) A) and B)
F) A) and C)

Question 6

According to the loanable funds model,which of the following events would result in higher interest rates and greater saving?

Accepted Answer

A)   Firms become pessimistic about the future and,as a result,they cut back on their plans to buy new equipment and build new factories.
B)   The government goes from running a budget deficit to running a budget surplus.
C)   Congress passes a reform of the tax laws that encourages greater saving.
D)   Congress passes a reform of the tax laws that encourages greater investment.E) A) and B)
F) B) and D)

Question 7

As chief financial officer you sell newly issued bonds on behalf of your firm.Your firm is

Accepted Answer

A)   borrowing directly.
B)   borrowing indirectly.
C)   lending directly.
D)   lending indirectly.E) B) and C)
F) All of the above

Question 8

Most entrepreneurs finance their purchases of real capital using their past saving.

Accepted Answer

A) True 
 B)False

Question 9

Zeta Corporation has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 1 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.E) A) and B)
F) B) and C)

Question 10

What are the basic differences between bonds and stocks?

Accepted Answer

A bond is a certificate of indebtedness ...

Question 11

Public saving is T - G,while private saving is Y - T - C.

Accepted Answer

A) True 
 B)False

Question 12

Public saving is equal to national saving minus private saving.

Accepted Answer

A) True 
 B)False

Question 13

Other things the same,when the interest rate rises,

Accepted Answer

A)   people would want to lend more,making the supply of loanable funds increase.
B)   people would want to lend less,making the supply of loanable funds decrease.
C)   people would want to lend more,making the quantity of loanable funds supplied increase.
D)   people would want to lend less,making the quantity of loanable funds supplied decrease.E) None of the above
F) All of the above

Question 14

If the government institutes policies that increase incentives to save,then in the loanable funds market

Accepted Answer

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

Question 15

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.E) A) and B)
F) None of the above

Question 16

A national chain of grocery stores wants to finance the construction of several new stores.The firm has limited internal funds,so it likely will

Accepted Answer

A)   demand the required funds by buying bonds.
B)   demand the required funds by selling bonds.
C)   supply the required funds by buying bonds.
D)   supply the required funds by selling bonds.E) A) and D)
F) A) and C)

Question 17

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 yieldE) A) and C)
F) A) and B)

Question 18

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

Accepted Answer

A)   and quantity of loanable funds rise.
B)   and quantity of loanable funds fall.
C)   rises and the quantity of loanable funds falls.
D)   falls and the quantity of loanable funds rises.E) A) and B)
F) B) and D)

Question 19

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

Accepted Answer

A)   Each one of these is equal to national saving.
B)   Each one of these is equal to public saving.
C)   The first of these is private saving;the second one is public saving.
D)   The first of these is public saving;the second one is private saving.E) A) and B)
F) B) and C)

Question 20

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) All of the above
F) C) and D)

Exam 26: Saving, investment, and the Financial System

Public saving is equal to national saving minus private saving.

Correct Answer
verified

Which of the following equations represents GDP for a closed economy?

Correct Answer
verified

Public saving is T - G,while private saving is Y - T - C.

Correct Answer
verified

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

Correct Answer
verified

According to the loanable funds model,which of the following events would result in higher interest rates and greater saving?

Correct Answer
verified

What are the basic differences between bonds and stocks?

Correct Answer
verified
A bond is a certificate of indebtedness ...
View Answer

When a country saves a larger portion of its GDP than it did before,it will have

Correct Answer
verified

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

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
verified

Correct Answer
verified
a.
Presumably,when this happens,unless e...
View Answer

As chief financial officer you sell newly issued bonds on behalf of your firm.Your firm is

Correct Answer
verified

If the government institutes policies that increase incentives to save,then in the loanable funds market

Correct Answer
verified

Institutions that help to match one person's saving with another person's investment are collectively called the

Correct Answer
verified

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

Correct Answer
verified

Zeta Corporation has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 1 percent.It has a price-earnings ratio which is

Correct Answer
verified

Most entrepreneurs finance their purchases of real capital using their past saving.

Correct Answer
verified

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

A national chain of grocery stores wants to finance the construction of several new stores.The firm has limited internal funds,so it likely will

Correct Answer
verified

Other things the same,when the interest rate rises,

Correct Answer
verified

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

Correct Answer
verified

Exam 26: Saving, investment, and the Financial System

Public saving is equal to national saving minus private saving.

Correct AnswerverifiedShow Answer

Which of the following equations represents GDP for a closed economy?

Correct AnswerverifiedShow Answer

Public saving is T - G,while private saving is Y - T - C.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the loanable funds model,which of the following events would result in higher interest rates and greater saving?

Correct AnswerverifiedShow Answer

What are the basic differences between bonds and stocks?

Correct AnswerverifiedA bond is a certificate of indebtedness ...View AnswerShow Answer

When a country saves a larger portion of its GDP than it did before,it will have

Correct AnswerverifiedShow Answer

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

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

Correct Answerverifieda.Presumably,when this happens,unless e...View AnswerShow Answer

As chief financial officer you sell newly issued bonds on behalf of your firm.Your firm is

Correct AnswerverifiedShow Answer

If the government institutes policies that increase incentives to save,then in the loanable funds market

Correct AnswerverifiedShow Answer

Institutions that help to match one person's saving with another person's investment are collectively called the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Zeta Corporation has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 1 percent.It has a price-earnings ratio which is

Correct AnswerverifiedShow Answer

Most entrepreneurs finance their purchases of real capital using their past saving.

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

A national chain of grocery stores wants to finance the construction of several new stores.The firm has limited internal funds,so it likely will

Correct AnswerverifiedShow Answer

Other things the same,when the interest rate rises,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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A bond is a certificate of indebtedness ...
View Answer

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a.
Presumably,when this happens,unless e...
View Answer

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Correct Answer
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Correct Answer
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