Question 1

If the price of an asset is expected to rise in the future:

Accepted Answer

A)  asset owners will be more willing to sell it now. 
B)  it will be more in demand today. 
C)  the price of the asset will fall today. 
D)  the market is irrational. 
A)  asset owners will be more willing to sell it now. 
B)  it will be more in demand today. 
C)  the price of the asset will fall today. 
D)  the market is irrational.

Question 2

A bank loan is a(n) _____ to the borrower and a(n) _____ to the bank.

Accepted Answer

A)  asset; liability 
B)  asset; asset 
C)  liability; liability 
D)  liability; asset 
A)  asset; liability 
B)  asset; asset 
C)  liability; liability 
D)  liability; asset

Question 3

An individual can reduce financial risk by diversifying investments, that is, by investing in several assets whose possible losses are independent events.

Accepted Answer

A) True 
 B)False

Question 4

The purchaser of a share of stock receives interest each year from the stock and then receives the purchase price of the stock at its maturity.

Accepted Answer

A) True 
 B)False

Question 5

There is a _____ relationship between the amount of loanable funds demanded and the rate of interest.

Accepted Answer

A)  positive 
B)  direct 
C)  negative 
D)  weak 
A)  positive 
B)  direct 
C)  negative 
D)  weak

Question 6

A liability is:

Accepted Answer

A)  having wronged someone and being held responsible in court. 
B)  a requirement to pay in the future. 
C)  the inability to perform an agreed task. 
D)  the requirement that banks offer insurance to depositors. 
A)  having wronged someone and being held responsible in court. 
B)  a requirement to pay in the future. 
C)  the inability to perform an agreed task. 
D)  the requirement that banks offer insurance to depositors.

Question 7

If private savings increase, the _____ loanable funds will _____, interest rates will _____, and the amount of borrowing will _____.

Accepted Answer

A)  demand for; increase; increase; increase 
B)  demand for; decrease; decrease; decrease 
C)  supply of; increase; decrease; increase 
D)  supply of; decrease; increase; decrease 
A)  demand for; increase; increase; increase 
B)  demand for; decrease; decrease; decrease 
C)  supply of; increase; decrease; increase 
D)  supply of; decrease; increase; decrease

Question 8

About 75% of the financial assets that Americans own are held through financial intermediaries rather than directly.

Accepted Answer

A) True 
 B)False

Question 9

Use the following to answer questions:  
-(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Southlandia?

Accepted Answer

A)  -10% 
B)  0% 
C)  10% 
D)  20% 
A)  -10% 
B)  0% 
C)  10% 
D)  20%

Question 10

An example that does NOT illustrate financial assets is:

Accepted Answer

A)  bonds. 
B)  stocks. 
C)  bank deposits. 
D)  gold coins. 
A)  bonds. 
B)  stocks. 
C)  bank deposits. 
D)  gold coins.

Question 11

Use the following to answer questions:  
-(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $75 billion?

Accepted Answer

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

Question 12

If stock prices follow a random walk, it means that stock prices are:

Accepted Answer

A)  unpredictable. 
B)  increasing. 
C)  decreasing 
D)  constant. 
A)  unpredictable. 
B)  increasing. 
C)  decreasing 
D)  constant.

Question 13

Which function is performed by financial intermediaries?

Accepted Answer

A)  transforming funds from many individuals to financial assets 
B)  transforming funds from many individuals to physical assets 
C)  helping individuals and businesses determine their tax liabilities 
D)  conducting fiscal policy 
A)  transforming funds from many individuals to financial assets 
B)  transforming funds from many individuals to physical assets 
C)  helping individuals and businesses determine their tax liabilities 
D)  conducting fiscal policy

Question 14

There is a negative relationship between the quantity of investment spending and the interest rate.

Accepted Answer

A) True 
 B)False

Question 15

When a corporation borrows money from lenders in exchange for a fixed rate of return and a given maturity, the corporation is:

Accepted Answer

A)  taking out a loan. 
B)  issuing bonds. 
C)  issuing stocks. 
D)  liquidating a bank deposit. 
A)  taking out a loan. 
B)  issuing bonds. 
C)  issuing stocks. 
D)  liquidating a bank deposit.

Question 16

Use the following to answer question 84:  
-(Figure: Demand for Loanable Funds) Use Figure: Demand for Loanable Funds. When the interest rate is 6%, the quantity demanded of loanable funds will equal:

Accepted Answer

A)  $30 billion. 
B)  $40 billion. 
C)  $50 billion. 
D)  $60 billion. 
A)  $30 billion. 
B)  $40 billion. 
C)  $50 billion. 
D)  $60 billion.

Question 17

The four main types of financial assets do NOT include:

Accepted Answer

A)  real estate. 
B)  bonds. 
C)  bank deposits. 
D)  loans. 
A)  real estate. 
B)  bonds. 
C)  bank deposits. 
D)  loans.

Question 18

In a closed economy government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, and GDP was $110 billion this year. Investment spending was $10 billion. As a result:

Accepted Answer

A)  private savings were $10 billion. 
B)  the government's budget balance was a surplus of $10 billion. 
C)  there was no net savings. 
D)  private savings were $20 billion. 
A)  private savings were $10 billion. 
B)  the government's budget balance was a surplus of $10 billion. 
C)  there was no net savings. 
D)  private savings were $20 billion.

Question 19

Crowding out means that:

Accepted Answer

A)  private savings decreases when the government borrows money. 
B)  private investment decreases when the government borrows money. 
C)  there are too many players in the financial markets. 
D)  some bondholders will be squeezed out of the market. 
A)  private savings decreases when the government borrows money. 
B)  private investment decreases when the government borrows money. 
C)  there are too many players in the financial markets. 
D)  some bondholders will be squeezed out of the market.

Question 20

Higher rates of interest tend to _____ the quantity of loanable funds demanded, and lower rates of interest tend to _____ it.

Accepted Answer

A)  increase; reduce 
B)  reduce; reduce 
C)  increase; increase 
D)  reduce; increase 
A)  increase; reduce 
B)  reduce; reduce 
C)  increase; increase 
D)  reduce; increase

If the price of an asset is expected to rise in the future:

A bank loan is a(n) _ to the borrower and a(n) _ to the bank.

An individual can reduce financial risk by diversifying investments, that is, by investing in several assets whose possible losses are independent events.

The purchaser of a share of stock receives interest each year from the stock and then receives the purchase price of the stock at its maturity.

There is a _____ relationship between the amount of loanable funds demanded and the rate of interest.

A liability is:

If private savings increase, the ___ loanable funds will _, interest rates will _, and the amount of borrowing will ___.

About 75% of the financial assets that Americans own are held through financial intermediaries rather than directly.

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Southlandia?

An example that does NOT illustrate financial assets is:

Use the following to answer questions: -(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $75 billion?

If stock prices follow a random walk, it means that stock prices are:

Which function is performed by financial intermediaries?

There is a negative relationship between the quantity of investment spending and the interest rate.

When a corporation borrows money from lenders in exchange for a fixed rate of return and a given maturity, the corporation is:

Use the following to answer question 84: -(Figure: Demand for Loanable Funds) Use Figure: Demand for Loanable Funds. When the interest rate is 6%, the quantity demanded of loanable funds will equal:

The four main types of financial assets do NOT include:

In a closed economy government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, and GDP was $110 billion this year. Investment spending was $10 billion. As a result:

Crowding out means that:

Higher rates of interest tend to _ the quantity of loanable funds demanded, and lower rates of interest tend to _ it.

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

If the price of an asset is expected to rise in the future:

A bank loan is a(n) _____ to the borrower and a(n) _____ to the bank.

An individual can reduce financial risk by diversifying investments, that is, by investing in several assets whose possible losses are independent events.

The purchaser of a share of stock receives interest each year from the stock and then receives the purchase price of the stock at its maturity.

There is a _____ relationship between the amount of loanable funds demanded and the rate of interest.

A liability is:

If private savings increase, the _____ loanable funds will _____, interest rates will _____, and the amount of borrowing will _____.

About 75% of the financial assets that Americans own are held through financial intermediaries rather than directly.

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Southlandia?

An example that does NOT illustrate financial assets is:

Use the following to answer questions: -(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $75 billion?

If stock prices follow a random walk, it means that stock prices are:

Which function is performed by financial intermediaries?

There is a negative relationship between the quantity of investment spending and the interest rate.

When a corporation borrows money from lenders in exchange for a fixed rate of return and a given maturity, the corporation is:

Use the following to answer question 84: -(Figure: Demand for Loanable Funds) Use Figure: Demand for Loanable Funds. When the interest rate is 6%, the quantity demanded of loanable funds will equal:

The four main types of financial assets do NOT include:

In a closed economy government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, and GDP was $110 billion this year. Investment spending was $10 billion. As a result:

Crowding out means that:

Higher rates of interest tend to _____ the quantity of loanable funds demanded, and lower rates of interest tend to _____ it.

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

A bank loan is a(n) _ to the borrower and a(n) _ to the bank.

If private savings increase, the ___ loanable funds will _, interest rates will _, and the amount of borrowing will ___.

Higher rates of interest tend to _ the quantity of loanable funds demanded, and lower rates of interest tend to _ it.