Exam 8: Saving, Investment, and the Financial System

Many economists believe that if the current income tax were replaced with a consumption tax, then saving, investment, economic growth, and the standard of living of Canadians would increase.

Who purchased the correct asset to meet their objective?

What is the single most important piece of information about a stock?

What is a bond?

What would NOT result from replacing the income tax with a consumption tax?

What is the effect of an increase in budget deficit?

Which statement best defines a corporation's earnings?

-Refer to Table 8-2. Which company had the highest dollar dividend?

Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if a government goes from a deficit to a surplus.

During the financial crisis of 2008-2009, the risk of lending and borrowing increased significantly. a) Use the supply and demand for loanable funds model to analyze the effects of increased risk on savings, investment, and the interest rate. b) Assume the following demand and supply of loanable funds equations: QD = 160 - 10r, and QS = -20 + 20r. How would you modify these equations to include risk?

Suppose the following equations give the demand and supply for loanable funds in billions of dollars; r is the real interest rate in percentage points : QD = 160-10r QS = -20 + 20r a) How do the demand and supply equations change if the government deficit increased by $5 billion? b) Calculate the new equilibrium interest rate and quantity of loanable funds. (Compare this to the zero-deficit equilibrium.) c) Calculate the changes in consumer and producer surplus due to the increase in government deficit. Who gains and who loses from the change in government deficit?

Mutual funds are a type of financial intermediary.

How does the supply and demand for loanable funds model reflect an increase in the goods and services tax rate?

Which term refers to the amount of revenue a firm receives for the sale of its products, minus its costs of production, as measured by its accountants?

Which term refers to the sale of stocks and bonds to raise money?

In 2014, what was the approximate level of debt-to-GDP?

Country B has private savings of $70 billion and investment expenditures of $60 billion. How much is Country B's deficit?

What does stock represent?

Which statement best defines retained earnings?

The country of Meritor uses the merit as its currency. Recent national income statistics shows that it has GDP of 900 million merits, no government transfer payments, taxes of 320 million merits, a budget surplus of 70 million merits, and investment of 300 million merits. What is the sum of its consumption and government expenditures?