Question 1

In a simple closed economy, all investment spending must come from:

Accepted Answer

A)  savings. 
B)  money creation. 
C)  debt issuance. 
D)  foreign borrowing. 
A)  savings. 
B)  money creation. 
C)  debt issuance. 
D)  foreign borrowing.

Question 2

Given an annual interest rate of 2%, the present value of a future payment of $1,500 to be paid in one year is:

Accepted Answer

A)  $1,250.55. 
B)  $1,470.59. 
C)  $1,530. 
D)  $1,500. 
A)  $1,250.55. 
B)  $1,470.59. 
C)  $1,530. 
D)  $1,500.

Question 3

Use the following to answer questions:  
-(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 9%, the amount of planned investment spending is:

Accepted Answer

A)  $1,800. 
B)  $2,000. 
C)  $4,000. 
D)  $5,500. 
A)  $1,800. 
B)  $2,000. 
C)  $4,000. 
D)  $5,500.

Question 4

The main role of financial systems is to:

Accepted Answer

A)  make the capitalist class richer. 
B)  provide credit cards to as many people as possible. 
C)  channel goods and services to the people willing to pay for them. 
D)  channel funds from savers into investments. 
A)  make the capitalist class richer. 
B)  provide credit cards to as many people as possible. 
C)  channel goods and services to the people willing to pay for them. 
D)  channel funds from savers into investments.

Question 5

National savings is the sum of private savings and:

Accepted Answer

A)  private consumption. 
B)  government tax revenue. 
C)  the budget balance. 
D)  trade surplus. 
A)  private consumption. 
B)  government tax revenue. 
C)  the budget balance. 
D)  trade surplus.

Question 6

Use the following to answer questions:  
-(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 15%, the last project undertaken is:

Accepted Answer

A)  F. 
B)  G. 
C)  H. 
D)  I. 
A)  F. 
B)  G. 
C)  H. 
D)  I.

Question 7

If in an open economy a country imports more than it exports and the government budget deficit increases, interest rates will _____ and the amount of borrowing will _____.

Accepted Answer

A)  increase; increase 
B)  decrease; increase 
C)  increase; change unpredictably 
D)  change unpredictably; increase 
A)  increase; increase 
B)  decrease; increase 
C)  increase; change unpredictably 
D)  change unpredictably; increase

Question 8

If interest rates increase, making bonds more attractive, the demand for stock will _____ and the price of stock will _____.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 9

According to the savings-investment spending identity:

Accepted Answer

A)  savings and investment spending are always equal for the economy as a whole. 
B)  for long-run economic growth, savings must be more than investment spending. 
C)  for long-run economic growth, savings must be less than investment spending. 
D)  the identity of savers and investors is important for encouraging long-run economic growth. 
A)  savings and investment spending are always equal for the economy as a whole. 
B)  for long-run economic growth, savings must be more than investment spending. 
C)  for long-run economic growth, savings must be less than investment spending. 
D)  the identity of savers and investors is important for encouraging long-run economic growth.

Question 10

Taxes equal:

Accepted Answer

A)  government spending plus private savings. 
B)  total spending minus consumption minus investment minus private savings. 
C)  total income minus consumption minus private savings. 
D)  consumption plus private savings plus total income. 
A)  government spending plus private savings. 
B)  total spending minus consumption minus investment minus private savings. 
C)  total income minus consumption minus private savings. 
D)  consumption plus private savings plus total income.

Question 11

A common strategy to reduce the risk of a large financial loss is to:

Accepted Answer

A)  buy and sell assets through a mutual fund since mutual funds cannot lose money. 
B)  diversify financial assets so that their risks of failure are unrelated. 
C)  buy financial assets from developing countries because the rates of return are very high and safe and their national currencies are much more stable than the U.S. dollar. 
D)  buy real instead of financial assets. 
A)  buy and sell assets through a mutual fund since mutual funds cannot lose money. 
B)  diversify financial assets so that their risks of failure are unrelated. 
C)  buy financial assets from developing countries because the rates of return are very high and safe and their national currencies are much more stable than the U.S. dollar. 
D)  buy real instead of financial assets.

Question 12

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is investment spending?

Accepted Answer

A)  $3.5 trillion 
B)  $3 trillion 
C)  $2.5 trillion 
D)  $2 trillion 
A)  $3.5 trillion 
B)  $3 trillion 
C)  $2.5 trillion 
D)  $2 trillion

Question 13

Transactions costs are likely to be the HIGHEST for:

Accepted Answer

A)  loans. 
B)  bonds. 
C)  stocks. 
D)  bank deposits. 
A)  loans. 
B)  bonds. 
C)  stocks. 
D)  bank deposits.

Question 14

MOST physical capital, except for infrastructure, is provided by: I. governments through public education.
II) investment spending by private sector firms.

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 15

The sources of financing of physical capital include:

Accepted Answer

A)  domestic consumption. 
B)  foreign borrowing from the home country. 
C)  foreign investment in the home country. 
D)  foreign consumption. 
A)  domestic consumption. 
B)  foreign borrowing from the home country. 
C)  foreign investment in the home country. 
D)  foreign consumption.

Question 16

Use the following to answer questions:  
-(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 13%, the amount of planned investment spending is:

Accepted Answer

A)  $200. 
B)  $800. 
C)  $1,000. 
D)  $2,000. 
A)  $200. 
B)  $800. 
C)  $1,000. 
D)  $2,000.

Question 17

A financial asset is:

Accepted Answer

A)  a physical asset like a car. 
B)  a claim that entitles the owner to future income from the seller. 
C)  the value of accumulated savings. 
D)  another term for capital. 
A)  a physical asset like a car. 
B)  a claim that entitles the owner to future income from the seller. 
C)  the value of accumulated savings. 
D)  another term for capital.

Question 18

The financial system performs certain tasks to make the financial market more efficient. These tasks do NOT include:

Accepted Answer

A)  reducing risk. 
B)  reducing menu costs. 
C)  reducing transaction costs. 
D)  providing liquidity. 
A)  reducing risk. 
B)  reducing menu costs. 
C)  reducing transaction costs. 
D)  providing liquidity.

Question 19

The savings-investment spending identity says that savings and investment spending are always equal for the economy as a whole.

Accepted Answer

A) True 
 B)False

Question 20

Use the following to answer questions:  
-(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 4% and a new equilibrium quantity of loanable funds of $75 billion?

Accepted Answer

A)  Profit expectations for business investments become less optimistic. 
B)  Capital inflows from foreign citizens decline. 
C)  The federal government runs a budget deficit, rather than a surplus. 
D)  The government eliminates taxes on income from interest earned. 
A)  Profit expectations for business investments become less optimistic. 
B)  Capital inflows from foreign citizens decline. 
C)  The federal government runs a budget deficit, rather than a surplus. 
D)  The government eliminates taxes on income from interest earned.

In a simple closed economy, all investment spending must come from:

Given an annual interest rate of 2%, the present value of a future payment of $1,500 to be paid in one year is:

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 9%, the amount of planned investment spending is:

The main role of financial systems is to:

National savings is the sum of private savings and:

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 15%, the last project undertaken is:

If in an open economy a country imports more than it exports and the government budget deficit increases, interest rates will _ and the amount of borrowing will _.

If interest rates increase, making bonds more attractive, the demand for stock will _ and the price of stock will _.

According to the savings-investment spending identity:

Taxes equal:

A common strategy to reduce the risk of a large financial loss is to:

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is investment spending?

Transactions costs are likely to be the HIGHEST for:

MOST physical capital, except for infrastructure, is provided by: I. governments through public education. II) investment spending by private sector firms.

The sources of financing of physical capital include:

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 13%, the amount of planned investment spending is:

A financial asset is:

The financial system performs certain tasks to make the financial market more efficient. These tasks do NOT include:

The savings-investment spending identity says that savings and investment spending are always equal for the economy as a whole.

Use the following to answer questions: -(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 4% and a new equilibrium quantity of loanable funds of $75 billion?

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 10: Savings, Investment Spending, and the Financial Syst

In a simple closed economy, all investment spending must come from:

Given an annual interest rate of 2%, the present value of a future payment of $1,500 to be paid in one year is:

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 9%, the amount of planned investment spending is:

The main role of financial systems is to:

National savings is the sum of private savings and:

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 15%, the last project undertaken is:

If in an open economy a country imports more than it exports and the government budget deficit increases, interest rates will _____ and the amount of borrowing will _____.

If interest rates increase, making bonds more attractive, the demand for stock will _____ and the price of stock will _____.

According to the savings-investment spending identity:

Taxes equal:

A common strategy to reduce the risk of a large financial loss is to:

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is investment spending?

Transactions costs are likely to be the HIGHEST for:

MOST physical capital, except for infrastructure, is provided by: I. governments through public education. II) investment spending by private sector firms.

The sources of financing of physical capital include:

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 13%, the amount of planned investment spending is:

A financial asset is:

The financial system performs certain tasks to make the financial market more efficient. These tasks do NOT include:

The savings-investment spending identity says that savings and investment spending are always equal for the economy as a whole.

Use the following to answer questions: -(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 4% and a new equilibrium quantity of loanable funds of $75 billion?

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

If in an open economy a country imports more than it exports and the government budget deficit increases, interest rates will _ and the amount of borrowing will _.

If interest rates increase, making bonds more attractive, the demand for stock will _ and the price of stock will _.