Question 1

Suppose Suncor Energy sells a bond. What is the company doing?

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 
A)  borrowing directly from the public 
B)  borrowing indirectly from the public 
C)  lending directly to the public 
D)  lending indirectly to the public

Question 2

You have two sets of estimates of national account numbers for a closed economy for next year. In the first set, government expenditures will be $30 billion, transfer payments will be $10 billion, and taxes will be $50 billion. Under the second set, GDP will be $200 billion, taxes will be $50 billion, transfer payments will be $20 billion, consumption will be $120 billion, and investment will be $30 billion. Based on these numbers, what are the respective estimated results?

Accepted Answer

A)  $20 billion surplus and a $20 billion surplus 
B)  $20 billion surplus and a $20 billion deficit 
C)  $10 billion surplus and a $20 billion surplus 
D)  $10 billion surplus and a $20 billion deficit 
A)  $20 billion surplus and a $20 billion surplus 
B)  $20 billion surplus and a $20 billion deficit 
C)  $10 billion surplus and a $20 billion surplus 
D)  $10 billion surplus and a $20 billion deficit

Question 3

Corporate bonds generally have higher interest rates than federal government bonds.

Accepted Answer

A) True 
 B)False

Question 4

Which statement best defines financial intermediaries?

Accepted Answer

A)  They are the same as financial markets. 
B)  They are individuals who make a profit by buying a stock low and selling it high. 
C)  They are a more general name for financial assets, such as stocks, bonds, and chequing accounts. 
D)  They are financial institutions through which savers can indirectly provide funds to borrowers. 
A)  They are the same as financial markets. 
B)  They are individuals who make a profit by buying a stock low and selling it high. 
C)  They are a more general name for financial assets, such as stocks, bonds, and chequing accounts. 
D)  They are financial institutions through which savers can indirectly provide funds to borrowers.

Question 5

Suppose that in a closed economy GDP is 10,000, consumption is 6500, and taxes are 2000. What value of government expenditures would make national saving equal 1500?

Accepted Answer

A)  2000 
B)  3000 
C)  7000 
D)  9000 
A)  2000 
B)  3000 
C)  7000 
D)  9000

Question 6

What is a characteristic of the bond market?

Accepted Answer

A)  Some bonds have terms as short as a few months. 
B)  Because they are risky, bonds pay a low rate of interest. 
C)  Corporations buy bonds to raise funds. 
D)  Bonds are rarely used as financial instruments. 
A)  Some bonds have terms as short as a few months. 
B)  Because they are risky, bonds pay a low rate of interest. 
C)  Corporations buy bonds to raise funds. 
D)  Bonds are rarely used as financial instruments.

Question 7

Who would a macroeconomist consider as investment?

Accepted Answer

A)  Joe purchases a bond issued by the Canadian government 
B)  David purchases shares issued by MLSE 
C)  Nick builds a new house 
D)  Gina buys an amount of gold 
A)  Joe purchases a bond issued by the Canadian government 
B)  David purchases shares issued by MLSE 
C)  Nick builds a new house 
D)  Gina buys an amount of gold

Question 8

In a closed economy, investment must be equal to private saving.

Accepted Answer

A) True 
 B)False

Question 9

What has the typical price/earnings ratio been historically?

Accepted Answer

A)  about 5 
B)  about 10 
C)  about 15 
D)  about 20 
A)  about 5 
B)  about 10 
C)  about 15 
D)  about 20

Question 10

Which statement best defines a mutual fund?

Accepted Answer

A)  It is a financial market where small firms agree to sell stocks and bonds to raise funds. 
B)  It is a fund set aside by a local government to lend to small firms who want to invest in projects that are beneficial to the firm and community. 
C)  It is an institution that sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit. 
D)  It is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks and bonds. 
A)  It is a financial market where small firms agree to sell stocks and bonds to raise funds. 
B)  It is a fund set aside by a local government to lend to small firms who want to invest in projects that are beneficial to the firm and community. 
C)  It is an institution that sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit. 
D)  It is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks and bonds.

Question 11

What does the slope of the demand for loanable funds curve represent?

Accepted Answer

A)  the positive relation between the real interest rate and investment 
B)  the negative relation between the real interest rate and investment 
C)  the positive relation between the real interest rate and saving 
D)  the negative relation between the real interest rate and saving 
A)  the positive relation between the real interest rate and investment 
B)  the negative relation between the real interest rate and investment 
C)  the positive relation between the real interest rate and saving 
D)  the negative relation between the real interest rate and saving

Question 12

Assuming that all else remains equal, when people become more optimistic about a company's future, what is most likely to happen to the company's stock?

Accepted Answer

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

Question 13

Which statement best describes a characteristic of a bond?

Accepted Answer

A)  The maturity of a bond refers to the amount to be paid back. 
B)  The principal of the bond refers to the person buying the bond. 
C)  A bond buyer cannot sell a bond before it matures. 
D)  The interest paid by a bond depends on its price. 
A)  The maturity of a bond refers to the amount to be paid back. 
B)  The principal of the bond refers to the person buying the bond. 
C)  A bond buyer cannot sell a bond before it matures. 
D)  The interest paid by a bond depends on its price.

Question 14

Which statement best characterizes the lending strategy of banks?

Accepted Answer

A)  Banks make most their profits from account fees. 
B)  Banks lend mostly to large and familiar companies rather than smaller local firms. 
C)  Banks charge borrowers a slightly lower interest rate than they pay to depositors. 
D)  Banks lend money both for investment and consumption purposes. 
A)  Banks make most their profits from account fees. 
B)  Banks lend mostly to large and familiar companies rather than smaller local firms. 
C)  Banks charge borrowers a slightly lower interest rate than they pay to depositors. 
D)  Banks lend money both for investment and consumption purposes.

Question 15

If the current market interest rate for loanable funds is above the equilibrium level, what would we expect to happen?

Accepted Answer

A)  Because there is a surplus of loanable funds, the interest rate will rise. 
B)  Because there is a shortage of loanable funds, the interest rate will rise. 
C)  Because there is a shortage of loanable funds, the interest rate will fall. 
D)  Because there is a surplus of loanable funds, the interest rate will fall. 
A)  Because there is a surplus of loanable funds, the interest rate will rise. 
B)  Because there is a shortage of loanable funds, the interest rate will rise. 
C)  Because there is a shortage of loanable funds, the interest rate will fall. 
D)  Because there is a surplus of loanable funds, the interest rate will fall.

Question 16

Corporations receive no proceeds from the resale of their stock.

Accepted Answer

A) True 
 B)False

Question 17

PacknCamp Corporation has a price of $40, has issued 2 million shares, has increased its cumulated retained earnings by $2 million, and has a dividend yield of 2 percent. What is the price/earnings ratio of PacknCamp?

Accepted Answer

A)  40, which is high compared to historical standards of the market 
B)  40, which is low compared to historical standards of the market 
C)  20, which is low compared to historical standards of the market 
D)  20, which is high compared to historical standards of the market 
A)  40, which is high compared to historical standards of the market 
B)  40, which is low compared to historical standards of the market 
C)  20, which is low compared to historical standards of the market 
D)  20, which is high compared to historical standards of the market

Question 18

When opening a restaurant, you may need to buy tables, an oven, and credit card processing equipment. What do economists call these expenditures?

Accepted Answer

A)  capital investment 
B)  investment in human capital 
C)  business consumption expenditures 
D)  savings depletion 
A)  capital investment 
B)  investment in human capital 
C)  business consumption expenditures 
D)  savings depletion

Question 19

If Parliament reduced the tax rate on interest income, what would most likely happen to investment and saving?

Accepted Answer

A)  Investment would increase, and saving would decrease. 
B)  Investment would decrease, and saving would increase. 
C)  Investment and saving would both increase. 
D)  Investment and saving would both decrease. 
A)  Investment would increase, and saving would decrease. 
B)  Investment would decrease, and saving would increase. 
C)  Investment and saving would both increase. 
D)  Investment and saving would both decrease.

Question 20

What do shareholders receive when they are paid a dividend?

Accepted Answer

A)  a fixed share of the price of the stock 
B)  the face value of the stock at the maturity date 
C)  a share of the company's profit 
D)  interest 
A)  a fixed share of the price of the stock 
B)  the face value of the stock at the maturity date 
C)  a share of the company's profit 
D)  interest

Suppose Suncor Energy sells a bond. What is the company doing?

Corporate bonds generally have higher interest rates than federal government bonds.

Which statement best defines financial intermediaries?

Suppose that in a closed economy GDP is 10,000, consumption is 6500, and taxes are 2000. What value of government expenditures would make national saving equal 1500?

What is a characteristic of the bond market?

Who would a macroeconomist consider as investment?

In a closed economy, investment must be equal to private saving.

What has the typical price/earnings ratio been historically?

Which statement best defines a mutual fund?

What does the slope of the demand for loanable funds curve represent?

Assuming that all else remains equal, when people become more optimistic about a company's future, what is most likely to happen to the company's stock?

Which statement best describes a characteristic of a bond?

Which statement best characterizes the lending strategy of banks?

If the current market interest rate for loanable funds is above the equilibrium level, what would we expect to happen?

Corporations receive no proceeds from the resale of their stock.

PacknCamp Corporation has a price of $40, has issued 2 million shares, has increased its cumulated retained earnings by $2 million, and has a dividend yield of 2 percent. What is the price/earnings ratio of PacknCamp?

When opening a restaurant, you may need to buy tables, an oven, and credit card processing equipment. What do economists call these expenditures?

If Parliament reduced the tax rate on interest income, what would most likely happen to investment and saving?

What do shareholders receive when they are paid a dividend?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 8: Saving, Investment, and the Financial System

Suppose Suncor Energy sells a bond. What is the company doing?

Corporate bonds generally have higher interest rates than federal government bonds.

Which statement best defines financial intermediaries?

Suppose that in a closed economy GDP is 10,000, consumption is 6500, and taxes are 2000. What value of government expenditures would make national saving equal 1500?

What is a characteristic of the bond market?

Who would a macroeconomist consider as investment?

In a closed economy, investment must be equal to private saving.

What has the typical price/earnings ratio been historically?

Which statement best defines a mutual fund?

What does the slope of the demand for loanable funds curve represent?

Assuming that all else remains equal, when people become more optimistic about a company's future, what is most likely to happen to the company's stock?

Which statement best describes a characteristic of a bond?

Which statement best characterizes the lending strategy of banks?

If the current market interest rate for loanable funds is above the equilibrium level, what would we expect to happen?

Corporations receive no proceeds from the resale of their stock.

PacknCamp Corporation has a price of $40, has issued 2 million shares, has increased its cumulated retained earnings by $2 million, and has a dividend yield of 2 percent. What is the price/earnings ratio of PacknCamp?

When opening a restaurant, you may need to buy tables, an oven, and credit card processing equipment. What do economists call these expenditures?

If Parliament reduced the tax rate on interest income, what would most likely happen to investment and saving?

What do shareholders receive when they are paid a dividend?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters