Question 1

An increase in the budget deficit

Accepted Answer

A)   makes investment spending fall.
B)   makes investment spending rise.
C)   does not affect investment spending.
D)   may increase, decrease, or not affect investment spending.E) All of the above
F) A) and B)

Question 2

If the supply 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) B) and C)
F) A) and D)

Question 3

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 D)
F) B) and C)

Question 4

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 bondE) A) and C)
F) C) and D)

Question 5

Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a

Accepted Answer

A)   saver or as a supplier of funds.
B)   saver or as a demander of funds.
C)   borrower or as a supplier of funds.
D)   borrower or as a demander of funds.E) A) and B)
F) A) and C)

Question 6

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

Question 7

The final element of a financial crisis is

Accepted Answer

A)   an economic downturn.
B)   a decline in confidence in financial institutions.
C)   declining prices of real estate or other assets.
D)   a vicious circle.E) A) and B)
F) A) and C)

Question 8

An increase in the budget deficit would cause a

Accepted Answer

A)   shortage of loanable funds at the original interest rate, which would lead to falling interest rates.
B)   surplus of loanable funds at the original interest rate, which would lead to rising interest rates.
C)   shortage of loanable funds at the original interest rate, which would lead to rising interest rates.
D)   surplus of loanable funds at the original interest rate, which would lead to falling interest rates.E) None of the above
F) C) and D)

Question 9

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

Question 10

Other things the same, as the maturity of a bond becomes longer, the bond will pay

Accepted Answer

A)   a lower interest rate because it has less risk.
B)   a lower interest rate because it has more risk.
C)   a higher interest rate because it has more risk.
D)   the same interest rate, because there is no relationship between term and risk.E) B) and D)
F) A) and D)

Question 11

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 fundsE) None of the above
F) A) and C)

Question 12

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) All of the above
F) None of the above

Question 13

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500, consumption equals 7,000, and government purchases equal 3,000. What are private saving and public saving?

Accepted Answer

A)   1,500 and -500, respectively
B)   1,500 and 500, respectively
C)   1,000 and -500, respectively
D)   1,000 and 500, respectivelyE) A) and C)
F) A) and B)

Question 14

Which of the following is a financial-market transaction?

Accepted Answer

A)   A saver buys shares in a mutual fund.
B)   A saver deposits money into a credit union.
C)   A saver buys a bond a corporation has just issued so it can purchase capital.
D)   None of the above is correct.E) B) and D)
F) All of the above

Question 15

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Accepted Answer

A)   Interest rates would rise.
B)   Interest rates would be unaffected.
C)   Interest rates would fall.
D)   The effect on the interest rate is uncertain.E) C) and D)
F) None of the above

Question 16

Use the following table to answer the following questions.
Table 8-1
 
-Refer to Table 8-1. In dollar terms, which company paid the highest dividend per share?

Accepted Answer

A)   GenMills
B)   Gillette
C)   Graco
D)   HersheyE) A) and B)
F) A) and C)

Question 17

If Research in Motion, Inc. sells a bond it is

Accepted Answer

A)   borrowing directly from the public.
B)   borrowing indirectly from the public.
C)   lending directly to the public.
D)   lending indirectly to the public.E) None of the above
F) A) and C)

Question 18

Which advantage(s)  do mutual funds claim to provide?

Accepted Answer

A)   diversification and access to the skills of professional money managers
B)   diversification but not access to the skills of professional money managers
C)   access to the skills of professional money managers but not diversification
D)   neither diversification nor access to the skills of professional money managers.E) All of the above
F) None of the above

Question 19

A low P/E for a stock indicates that

Accepted Answer

A)   people may expect earnings to fall in the future, perhaps because the firm will be faced with increased competition.
B)   its dividends have been low so that no one is willing to pay very much for it.
C)   the corporation is possibly overvalued.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 20

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

Exam 8: Saving, Investment, and the Financial System

A low P/E for a stock indicates that

Correct AnswerverifiedShow Answer

A corporation's earnings are

Correct AnswerverifiedShow Answer

An increase in the budget deficit would cause a

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

Which of the following is a financial-market transaction?

Correct AnswerverifiedShow Answer

Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a

Correct AnswerverifiedShow Answer

Which advantage(s) do mutual funds claim to provide?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following are financial intermediaries?

Correct AnswerverifiedShow Answer

An increase in the budget deficit

Correct AnswerverifiedShow Answer

Other things the same, as the maturity of a bond becomes longer, the bond will pay

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If Research in Motion, Inc. sells a bond it is

Correct AnswerverifiedShow Answer

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500, consumption equals 7,000, and government purchases equal 3,000. What are private saving and public saving?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Use the following table to answer the following questions. Table 8-1 -Refer to Table 8-1. In dollar terms, which company paid the highest dividend per share?

Correct AnswerverifiedShow Answer

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

The final element of a financial crisis is

Correct AnswerverifiedShow Answer

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified