Question 1

Loans are more liquid than bonds because they are more standardized than bonds.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)  exactly the same as 
B)  approximately the same as 
C)  less than 
D)  more than 
A)  exactly the same as 
B)  approximately the same as 
C)  less than 
D)  more than

Question 3

When a corporation borrows money from lenders in exchange for a fixed share of the firm's assets and potential profits, 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 4

Which task(s) is/are associated with the financial system? I. reducing transactions costs
II) reducing risk
III) providing liquidity

Accepted Answer

A)  I only 
B)  II only 
C)  III only 
D)  I, II, and III 
A)  I only 
B)  II only 
C)  III only 
D)  I, II, and III

Question 5

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 is running a budget balance of zero when it decides to increase defense spending by $200 billion and then finances the spending by selling bonds, the equilibrium interest rate will:

Accepted Answer

A)  fall to 12%. 
B)  rise to 16.5%. 
C)  rise to 18%. 
D)  rise to 21%. 
A)  fall to 12%. 
B)  rise to 16.5%. 
C)  rise to 18%. 
D)  rise to 21%.

Question 6

The savings-investment spending identity says that savings and investment spending are:

Accepted Answer

A)  always equal because private savings match government savings. 
B)  equal as long as there is no trade surplus or deficit. 
C)  always equal for the economy as a whole. 
D)  equal as long as there is no government budget deficit or surplus. 
A)  always equal because private savings match government savings. 
B)  equal as long as there is no trade surplus or deficit. 
C)  always equal for the economy as a whole. 
D)  equal as long as there is no government budget deficit or surplus.

Question 7

A loan is a:

Accepted Answer

A)  liability for the lender and an asset for the borrower. 
B)  physical asset that is traded in financial markets. 
C)  claim on a bank that obliges the bank to provide funds to a lender. 
D)  liability for the borrower and an asset for the lender. 
A)  liability for the lender and an asset for the borrower. 
B)  physical asset that is traded in financial markets. 
C)  claim on a bank that obliges the bank to provide funds to a lender. 
D)  liability for the borrower and an asset for the lender.

Question 8

An example that does NOT illustrate financial assets and/or liabilities is:

Accepted Answer

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

Question 9

More so than other financial assets, loans are specifically tailored to meet the needs of the borrower.

Accepted Answer

A) True 
 B)False

Question 10

The financial slump that began in the United States in the summer of 2007 was a result of:

Accepted Answer

A)  falling energy prices. 
B)  massive tax increases necessary to balance the federal budget. 
C)  a crisis in the foreign exchange market. 
D)  a sharp fall in housing prices. 
A)  falling energy prices. 
B)  massive tax increases necessary to balance the federal budget. 
C)  a crisis in the foreign exchange market. 
D)  a sharp fall in housing prices.

Question 11

Interest rates were high during the middle years of the period from 2002 to 2016 and then decreased primarily because the:

Accepted Answer

A)  supply of loanable funds steadily increased. 
B)  supply of loanable funds steadily decreased. 
C)  demand for loanable funds decreased and then increased because of conditions in the housing market. 
D)  demand for loanable funds increased and then decreased because of conditions in the housing market. 
A)  supply of loanable funds steadily increased. 
B)  supply of loanable funds steadily decreased. 
C)  demand for loanable funds decreased and then increased because of conditions in the housing market. 
D)  demand for loanable funds increased and then decreased because of conditions in the housing market.

Question 12

According to the efficient markets hypothesis:

Accepted Answer

A)  stocks are often overpriced. 
B)  stocks are often underpriced. 
C)  stocks are neither overpriced nor underpriced. 
D)  the random fluctuations in the value of stocks is unexplainable. 
A)  stocks are often overpriced. 
B)  stocks are often underpriced. 
C)  stocks are neither overpriced nor underpriced. 
D)  the random fluctuations in the value of stocks is unexplainable.

Question 13

Shares of stock are:

Accepted Answer

A)  shares of ownership in the issuing company. 
B)  a tax liability for the issuing company. 
C)  a tax deduction for the investor. 
D)  a debt of the issuing company to the investors who purchase the stock. 
A)  shares of ownership in the issuing company. 
B)  a tax liability for the issuing company. 
C)  a tax deduction for the investor. 
D)  a debt of the issuing company to the investors who purchase the stock.

Question 14

The price determined in the market for loanable funds is the:

Accepted Answer

A)  margin call. 
B)  profit rate. 
C)  transaction fee. 
D)  interest rate. 
A)  margin call. 
B)  profit rate. 
C)  transaction fee. 
D)  interest rate.

Question 15

The demand for stocks:

Accepted Answer

A)  is largely a guessing game. 
B)  mostly depends on their price. 
C)  is mostly a function of buyers' beliefs about their future prices. 
D)  comes from companies who want to borrow money. 
A)  is largely a guessing game. 
B)  mostly depends on their price. 
C)  is mostly a function of buyers' beliefs about their future prices. 
D)  comes from companies who want to borrow money.

Question 16

One advantage of bonds over loans is that:

Accepted Answer

A)  interest rates on bonds are generally lower than are interest rates on loans. 
B)  interest rates on bonds are generally higher than are interest rates on loans. 
C)  each bond is specifically tailored to meet the needs of the borrower so that no two bonds are alike. 
D)  bonds are more standardized than are loans. 
A)  interest rates on bonds are generally lower than are interest rates on loans. 
B)  interest rates on bonds are generally higher than are interest rates on loans. 
C)  each bond is specifically tailored to meet the needs of the borrower so that no two bonds are alike. 
D)  bonds are more standardized than are loans.

Question 17

Which item is an advantage of stock? I. reduction of risk for the owners of the company
II) increased welfare for investors who buy the stocks

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 18

A firm does NOT want to borrow money for a project when the:

Accepted Answer

A)  interest rate is higher than the rate of return on the project. 
B)  interest rate is lower than the rate of return on the project. 
C)  interest rate is positive. 
D)  rate of return on the project is positive. 
A)  interest rate is higher than the rate of return on the project. 
B)  interest rate is lower than the rate of return on the project. 
C)  interest rate is positive. 
D)  rate of return on the project is positive.

Question 19

Which statement is FALSE?

Accepted Answer

A)  When there is an increase in the government budget deficit, the total amount of borrowing falls. 
B)  When there is an increase in private savings, the interest rate decreases. 
C)  When there is an increase in the government budget deficit, private investment is crowded out. 
D)  When there is an increase in private savings, the total amount of borrowing increases. 
A)  When there is an increase in the government budget deficit, the total amount of borrowing falls. 
B)  When there is an increase in private savings, the interest rate decreases. 
C)  When there is an increase in the government budget deficit, private investment is crowded out. 
D)  When there is an increase in private savings, the total amount of borrowing increases.

Question 20

The government's budget deficit increases, and at the same time the trade deficit grows. This will lead to a(n) _____ in the demand and a(n) _____ in the supply of loanable funds in domestic markets.

Accepted Answer

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

Loans are more liquid than bonds because they are more standardized than bonds.

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

When a corporation borrows money from lenders in exchange for a fixed share of the firm's assets and potential profits, the corporation is:

Which task(s) is/are associated with the financial system? I. reducing transactions costs II) reducing risk III) providing liquidity

The savings-investment spending identity says that savings and investment spending are:

A loan is a:

An example that does NOT illustrate financial assets and/or liabilities is:

More so than other financial assets, loans are specifically tailored to meet the needs of the borrower.

The financial slump that began in the United States in the summer of 2007 was a result of:

Interest rates were high during the middle years of the period from 2002 to 2016 and then decreased primarily because the:

According to the efficient markets hypothesis:

Shares of stock are:

The price determined in the market for loanable funds is the:

The demand for stocks:

One advantage of bonds over loans is that:

Which item is an advantage of stock? I. reduction of risk for the owners of the company II) increased welfare for investors who buy the stocks

A firm does NOT want to borrow money for a project when the:

Which statement is FALSE?

The government's budget deficit increases, and at the same time the trade deficit grows. This will lead to a(n) _ in the demand and a(n) _ in the supply of loanable funds in domestic markets.

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

Loans are more liquid than bonds because they are more standardized than bonds.

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

When a corporation borrows money from lenders in exchange for a fixed share of the firm's assets and potential profits, the corporation is:

Which task(s) is/are associated with the financial system? I. reducing transactions costs II) reducing risk III) providing liquidity

The savings-investment spending identity says that savings and investment spending are:

A loan is a:

An example that does NOT illustrate financial assets and/or liabilities is:

More so than other financial assets, loans are specifically tailored to meet the needs of the borrower.

The financial slump that began in the United States in the summer of 2007 was a result of:

Interest rates were high during the middle years of the period from 2002 to 2016 and then decreased primarily because the:

According to the efficient markets hypothesis:

Shares of stock are:

The price determined in the market for loanable funds is the:

The demand for stocks:

One advantage of bonds over loans is that:

Which item is an advantage of stock? I. reduction of risk for the owners of the company II) increased welfare for investors who buy the stocks

A firm does NOT want to borrow money for a project when the:

Which statement is FALSE?

The government's budget deficit increases, and at the same time the trade deficit grows. This will lead to a(n) _____ in the demand and a(n) _____ in the supply of loanable funds in domestic markets.

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

The government's budget deficit increases, and at the same time the trade deficit grows. This will lead to a(n) _ in the demand and a(n) _ in the supply of loanable funds in domestic markets.