Question 1

An asset formed by pooling individual loans and selling shares in that pool is called a:

Accepted Answer

A)  loan-backed security. 
B)  mutual fund. 
C)  stock. 
D)  bond. 
A)  loan-backed security. 
B)  mutual fund. 
C)  stock. 
D)  bond.

Question 2

Use the following to answer questions:  
-(Table: National Income Accounts) Use Table: National Income Accounts. The value of tax revenue is:

Accepted Answer

A)  $1.8 trillion. 
B)  $4.9 trillion. 
C)  $2.1 trillion. 
D)  $1.6 trillion. 
A)  $1.8 trillion. 
B)  $4.9 trillion. 
C)  $2.1 trillion. 
D)  $1.6 trillion.

Question 3

In a closed economy, investment spending, I, must equal:

Accepted Answer

A)  GDP - C - G. 
B)  GDP - C. 
C)  GDP - C - G - X. 
D)  GDP - [C * G]. 
A)  GDP - C - G. 
B)  GDP - C. 
C)  GDP - C - G - X. 
D)  GDP - [C * G].

Question 4

You have an opportunity to pay $1,000 today and receive $1,200 a year from now. If the annual interest rate is 20%, the difference between the present value of the benefit and your investment is:

Accepted Answer

A)  $440. 
B)  $200. 
C)  $166. 
D)  0. 
A)  $440. 
B)  $200. 
C)  $166. 
D)  0.

Question 5

Private savings equals:

Accepted Answer

A)  income after taxes minus consumption. 
B)  taxes minus government spending on goods and services. 
C)  the total amount of savings accounts plus stocks plus bonds owned by households. 
D)  income plus investment. 
A)  income after taxes minus consumption. 
B)  taxes minus government spending on goods and services. 
C)  the total amount of savings accounts plus stocks plus bonds owned by households. 
D)  income plus investment.

Question 6

Over the past 100 years, the rate of return on stocks has averaged about _____, and the return on bonds has averaged approximately _____.

Accepted Answer

A)  20%; 25% 
B)  1%; 2% 
C)  -10%; 5% 
D)  7%; 2% 
A)  20%; 25% 
B)  1%; 2% 
C)  -10%; 5% 
D)  7%; 2%

Question 7

The government can increase savings by:

Accepted Answer

A)  taxing more than it spends. 
B)  spending more than it taxes. 
C)  increasing inflation. 
D)  increasing the deficit. 
A)  taxing more than it spends. 
B)  spending more than it taxes. 
C)  increasing inflation. 
D)  increasing the deficit.

Question 8

The value of all accumulated savings of a household is called:

Accepted Answer

A)  wealth. 
B)  income. 
C)  debt. 
D)  wages. 
A)  wealth. 
B)  income. 
C)  debt. 
D)  wages.

Question 9

Use the following to answer questions:  
-(Figure: Crowding Out) Use Figure: Crowding Out. If the supply of loanable funds curve shifts to the right, the result will be a(n) _____ in the total amount of borrowing and a(n) _____ in the interest rate.

Accepted Answer

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

Question 10

A physical asset is:

Accepted Answer

A)  a tangible asset that can be used to generate income and whose owner has the right to dispose of it at will. 
B)  a paper claim that entitles the owner to future income from the seller. 
C)  the value of accumulated savings. 
D)  human capital. 
A)  a tangible asset that can be used to generate income and whose owner has the right to dispose of it at will. 
B)  a paper claim that entitles the owner to future income from the seller. 
C)  the value of accumulated savings. 
D)  human capital.

Question 11

A risk-averse person:

Accepted Answer

A)  considers any risk unacceptable. 
B)  would never buy a financial asset. 
C)  is more sensitive to a loss than to a gain of an equal dollar amount. 
D)  would never buy insurance. 
A)  considers any risk unacceptable. 
B)  would never buy a financial asset. 
C)  is more sensitive to a loss than to a gain of an equal dollar amount. 
D)  would never buy insurance.

Question 12

A random walk is:

Accepted Answer

A)  the unpredictable movement over time of a variable. 
B)  the predicted fluctuations of a known variable. 
C)  the movement of GDP growth per capita in the long run. 
D)  a description of the economic fluctuations in the short run. 
A)  the unpredictable movement over time of a variable. 
B)  the predicted fluctuations of a known variable. 
C)  the movement of GDP growth per capita in the long run. 
D)  a description of the economic fluctuations in the short run.

Question 13

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 national saving?

Accepted Answer

A)  $4 trillion 
B)  $3.5 trillion 
C)  $2 trillion 
D)  $5.5 trillion 
A)  $4 trillion 
B)  $3.5 trillion 
C)  $2 trillion 
D)  $5.5 trillion

Question 14

National savings equals:

Accepted Answer

A)  private savings plus consumption spending. 
B)  trade balance plus the budget balance. 
C)  private savings plus the budget balance. 
D)  government spending plus taxes. 
A)  private savings plus consumption spending. 
B)  trade balance plus the budget balance. 
C)  private savings plus the budget balance. 
D)  government spending plus taxes.

Question 15

If the NASDAQ is down and the Dow Jones Industrial Average is higher on a particular day, which statement is likely to be TRUE?

Accepted Answer

A)  Investors are optimistic about the technology sector and pessimistic about the old-economy sector. 
B)  Investors are pessimistic about the technology sector and optimistic about the old-economy sector. 
C)  Investors prefer bonds to stocks. 
D)  Investors prefer stocks to bonds. 
A)  Investors are optimistic about the technology sector and pessimistic about the old-economy sector. 
B)  Investors are pessimistic about the technology sector and optimistic about the old-economy sector. 
C)  Investors prefer bonds to stocks. 
D)  Investors prefer stocks to bonds.

Question 16

An important advantage of bonds as a financial asset is that they:

Accepted Answer

A)  are standardized and therefore are easier to sell than loans. 
B)  offer higher rates of return than stocks. 
C)  allow the owner to receive a share of the company's profits in the form of dividends. 
D)  are guaranteed to be risk free. 
A)  are standardized and therefore are easier to sell than loans. 
B)  offer higher rates of return than stocks. 
C)  allow the owner to receive a share of the company's profits in the form of dividends. 
D)  are guaranteed to be risk free.

Question 17

If Mega Corp. borrows $8,000 and agrees to pay the lender $9,000 in one year, the annual interest rate on the loan is approximately _____%.

Accepted Answer

A)  9.0 
B)  10.5 
C)  12.5 
D)  11.8 
A)  9.0 
B)  10.5 
C)  12.5 
D)  11.8

Question 18

A relatively low saving rate affects productivity growth by:

Accepted Answer

A)  causing a shortage of funds for investment in physical capital. 
B)  decreasing consumption spending and increasing investment in human capital. 
C)  reducing the tax base and preventing the government from providing public goods. 
D)  stimulating imports and increasing the trade deficit. 
A)  causing a shortage of funds for investment in physical capital. 
B)  decreasing consumption spending and increasing investment in human capital. 
C)  reducing the tax base and preventing the government from providing public goods. 
D)  stimulating imports and increasing the trade deficit.

Question 19

If interest rates decrease, making bonds less 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 20

One reason financial institutions become very large is to:

Accepted Answer

A)  decrease transaction costs. 
B)  enjoy the power of having a large corporation. 
C)  increase transaction costs. 
D)  avoid the risks of diversification. 
A)  decrease transaction costs. 
B)  enjoy the power of having a large corporation. 
C)  increase transaction costs. 
D)  avoid the risks of diversification.

An asset formed by pooling individual loans and selling shares in that pool is called a:

Use the following to answer questions: -(Table: National Income Accounts) Use Table: National Income Accounts. The value of tax revenue is:

In a closed economy, investment spending, I, must equal:

You have an opportunity to pay $1,000 today and receive $1,200 a year from now. If the annual interest rate is 20%, the difference between the present value of the benefit and your investment is:

Private savings equals:

Over the past 100 years, the rate of return on stocks has averaged about _, and the return on bonds has averaged approximately _.

The government can increase savings by:

The value of all accumulated savings of a household is called:

Use the following to answer questions: -(Figure: Crowding Out) Use Figure: Crowding Out. If the supply of loanable funds curve shifts to the right, the result will be a(n) _ in the total amount of borrowing and a(n) _ in the interest rate.

A physical asset is:

A risk-averse person:

A random walk is:

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 national saving?

National savings equals:

If the NASDAQ is down and the Dow Jones Industrial Average is higher on a particular day, which statement is likely to be TRUE?

An important advantage of bonds as a financial asset is that they:

If Mega Corp. borrows $8,000 and agrees to pay the lender $9,000 in one year, the annual interest rate on the loan is approximately _____%.

A relatively low saving rate affects productivity growth by:

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

One reason financial institutions become very large is to:

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

An asset formed by pooling individual loans and selling shares in that pool is called a:

Use the following to answer questions: -(Table: National Income Accounts) Use Table: National Income Accounts. The value of tax revenue is:

In a closed economy, investment spending, I, must equal:

You have an opportunity to pay $1,000 today and receive $1,200 a year from now. If the annual interest rate is 20%, the difference between the present value of the benefit and your investment is:

Private savings equals:

Over the past 100 years, the rate of return on stocks has averaged about _____, and the return on bonds has averaged approximately _____.

The government can increase savings by:

The value of all accumulated savings of a household is called:

Use the following to answer questions: -(Figure: Crowding Out) Use Figure: Crowding Out. If the supply of loanable funds curve shifts to the right, the result will be a(n) _____ in the total amount of borrowing and a(n) _____ in the interest rate.

A physical asset is:

A risk-averse person:

A random walk is:

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 national saving?

National savings equals:

If the NASDAQ is down and the Dow Jones Industrial Average is higher on a particular day, which statement is likely to be TRUE?

An important advantage of bonds as a financial asset is that they:

If Mega Corp. borrows $8,000 and agrees to pay the lender $9,000 in one year, the annual interest rate on the loan is approximately _____%.

A relatively low saving rate affects productivity growth by:

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

One reason financial institutions become very large is to:

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

Over the past 100 years, the rate of return on stocks has averaged about _, and the return on bonds has averaged approximately _.

Use the following to answer questions: -(Figure: Crowding Out) Use Figure: Crowding Out. If the supply of loanable funds curve shifts to the right, the result will be a(n) _ in the total amount of borrowing and a(n) _ in the interest rate.

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