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

Use the following to answer questions: -(Figure: The Market for Loanable Funds III) Use Figure: The Market for Loanable Funds III. If the government in a closed economy finances deficits by selling bonds and it decides to decrease defense spending by $200 billion, the equilibrium interest rate will:

Use the following to answer question 94: -(Figure: Market for Loanable Funds I) Use Figure: Market for Loanable Funds I. The equilibrium interest rate in the loanable funds market is _____%.

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of investment spending?

Which statement describes an advantage to the recipient of foreign investment?

The present value of a $110 payment in one year, given an annual 10% interest rate, is:

The present value of $1 to be paid 10 years in the future will increase with the interest rate.

Use the following to answer questions: -(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. An increase in government borrowing will shift the demand for loanable funds to the _____ and _____ the interest rate.

According to the savings-investment spending identity, savings and investment spending are the most important components of GDP.

The efficient markets hypothesis says that asset prices embody all publicly available information.

Transaction costs are the:

Use the following to answer question 100: -(Figure: The Market for Loanable Funds with Government Borrowing) Use Figure: The Market for Loanable Funds with Government Borrowing. After an increase in government borrowing, the new equilibrium interest rate will rise from 6% to _____% and the amount of private savings will _____.

Use the following to answer questions: -(Figure: The Market for Loanable Funds III) Use Figure: The Market for Loanable Funds III. If the government in a closed economy finances deficits by selling bonds and it decides to decrease defense spending by $200 billion, the decrease in government spending will encourage _____ in additional private investment spending.

The loanable funds market examines the market outcome of the demand for funds from savers and the supply of funds from borrowers.

Which index includes the most companies and provides the broadest measure of stock market performance?

You are choosing whether to purchase a bond or stock. If you purchase the bond, you are likely to receive a _____ return in exchange for a _____ level of risk.

Assuming a positive interest rate, the present value of a future payment is _____ its future dollar amount.

The BEST way to reduce financial risk is to:

Use the following to answer questions: -(Figure: Loanable Funds Market) Use Figure: Loanable Funds Market. If the interest rate is 8%, businesses will want to borrow approximately:

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is private saving?

Crowding out hampers the economy by: