Question 1

Midwestern corporation issues bonds. Southern corporation issues stock. Which corporation used equity financing?

Accepted Answer

A)   both Midwestern corporation and Southern corporation
B)   Midwestern corporation but not Southern corporation
C)   Southern corporation but not Midwestern corporation
D)   neither Midwestern nor Southern corporationE) A) and B)
F) None of the above

Question 2

Other things the same, which bond would you expect to pay the highest interest rate?

Accepted Answer

A)   a bond issued by the U.S. government
B)   a bond issued by Microsoft Corporation
C)   a bond issued by the state of Montana
D)   a bond issued by a new chain of Brazilian-style restaurantsE) A) and B)
F) B) and C)

Question 3

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 4

A bond buyer is a

Accepted Answer

A)   saver. Long term bonds have less risk than short term bonds.
B)   saver. Long term bonds have more risk than short term bonds.
C)   borrower. Long term bonds have less risk than short term bonds.
D)   borrower. Long term bonds have more risk than short term bonds.E) All of the above
F) B) and C)

Question 5

When tax code changes increase investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment.

Accepted Answer

demand, ri...

Question 6

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

Accepted Answer

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

Question 7

All else equal, when people become more optimistic about a company's future, the

Accepted Answer

A)   supply of the stock and the price will both rise.
B)   supply of the stock and the price will both fall.
C)   demand for the stock and the price will both rise.
D)   demand for the stock and the price will both fall.E) A) and C)
F) A) and B)

Question 8

People who buy newly issued stock in a corporation such as Crate and Barrel provide

Accepted Answer

A)   debt finance and so become part owners of Crate and Barrel.
B)   debt finance and so become creditors of Crate and Barrel.
C)   equity finance and so become part owners of Crate and Barrel.
D)   equity finance and so become creditors of Crate and Barrel.E) A) and B)
F) All of the above

Question 9

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

Question 10

What are the basic differences between bonds and stocks?

Accepted Answer

A bond is a certificate of indebtedness ...

Question 11

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

Question 12

When the government has a budget surplus

Accepted Answer

A)   it buys more of its bonds from the public than it sells to the public.
B)   it spends more than it receives in tax revenue.
C)   private saving is greater than zero.
D)   exports are greater than imports.E) B) and C)
F) A) and B)

Question 13

For a closed economy, GDP is $12 trillion, consumption is $7 trillion, taxes net of transfers are $3 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?

Accepted Answer

A)   $5 trillion and $3 trillion, respectively
B)   $5 trillion and $1 trillion, respectively
C)   $2 trillion and $3 trillion, respectively
D)   $2 trillion and $1 trillion, respectivelyE) A) and B)
F) B) and C)

Question 14

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) B) and D)
F) B) and C)

Question 15

Which of the following could explain an increase in the interest rate and the equilibrium quantity of loanable funds?

Accepted Answer

A)   The demand for loanable funds shifted rightward.
B)   The demand for loanable funds shifted leftward.
C)   The supply of loanable funds shifted rightward.
D)   The supply of loanable funds shifted leftward.E) A) and B)
F) All of the above

Question 16

The length of time until a bond matures is called the

Accepted Answer

A)   perpetuity.
B)   term.
C)   maturity.
D)   intermediation.E) A) and B)
F) A) and D)

Question 17

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Accepted Answer

A)   interest rates and the equilibrium quantity of loanable funds rise.
B)   interest rates rise and the equilibrium quantity of loanable funds fall.
C)   interest rates fall and the equilibrium quantity of loanable funds rise.
D)   interest rates and the equilibrium quantity of loanable funds fall.E) A) and C)
F) B) and C)

Question 18

A higher interest rate makes less attractive. Therefore the quantity of loanable funds demanded decreases.

Accepted Answer

The answer of A higher interest rate makes less attractive....

Question 19

Volume, as reported in stock tables, refers to the

Accepted Answer

A)   number of shares traded.
B)   percentage of shares outstanding traded.
C)   number of shares traded times the price they sold at.
D)   number of shares of a company traded divided by the shares of all companies traded.E) All of the above
F) None of the above

Question 20

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would

Accepted Answer

A)   raise both private and public saving.
B)   raise private saving and lower public saving.
C)   lower private saving and raise public saving.
D)   lower private and public saving.E) A) and C)
F) C) and D)

Exam 26: Saving, Investment, and the Financial System

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

Correct AnswerverifiedShow Answer

A bond buyer is a

Correct AnswerverifiedShow Answer

Midwestern corporation issues bonds. Southern corporation issues stock. Which corporation used equity financing?

Correct AnswerverifiedShow Answer

Volume, as reported in stock tables, refers to the

Correct AnswerverifiedShow Answer

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would

Correct AnswerverifiedShow Answer

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Correct AnswerverifiedShow Answer

Other things the same, which bond would you expect to pay the highest interest rate?

Correct AnswerverifiedShow Answer

Which of the following is a financial-market transaction?

Correct AnswerverifiedShow Answer

All else equal, when people become more optimistic about a company's future, the

Correct AnswerverifiedShow Answer

The length of time until a bond matures is called the

Correct AnswerverifiedShow Answer

When tax code changes increase investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment.

Correct Answerverifieddemand, ri...View AnswerShow Answer

A higher interest rate makes less attractive. Therefore the quantity of loanable funds demanded decreases.

Correct AnswerverifiedShow Answer

Which of the following could explain an increase in the interest rate and the equilibrium quantity of loanable funds?

Correct AnswerverifiedShow Answer

Other things the same, when the interest rate rises,

Correct AnswerverifiedShow Answer

When the government has a budget surplus

Correct AnswerverifiedShow Answer

For a closed economy, GDP is $12 trillion, consumption is $7 trillion, taxes net of transfers are $3 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?

Correct AnswerverifiedShow Answer

The slope of the supply of loanable funds curve represents the

Correct AnswerverifiedShow Answer

People who buy newly issued stock in a corporation such as Crate and Barrel provide

Correct AnswerverifiedShow Answer

What are the basic differences between bonds and stocks?

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

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

When tax code changes increase investment incentives, the ___ for loanable funds curve shifts to the _. This results in a(n) _ in the interest rate and a(n) ___ in investment.

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

Correct Answer
verified