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

Which financial assets are likely to be the MOST liquid?

Use the following to answer questions: -(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. Other things being equal, a decrease in taxes on savings and investment income will shift _____ to the _____ and _____ the interest rate.

Which source(s) provide(s) funding for private investment spending? I. savings of the owners of a family business II) profits of a large corporation III) borrowing

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

The efficient markets hypothesis states that:

If a project costs $100,000 and is expected to return $105,000 in a year and if the interest rate is 6%, then the company will want to take out a loan to undertake the project.

Suppose that Maria wins a $7 million lottery and is trying to decide whether to take $2 million all at once or $7 million over 20 years. One bit of information Maria would need to know is what the prevailing _____ will be over the next 20 years.

An illiquid asset:

Implicit rent is an estimate of the amount that homeowners would pay if they had to rent their home and is also an estimate of the benefit of owning a home.

A decrease in the demand for loanable funds would MOST likely be caused by a(n):

Someone who has to decide whether to receive $100 now or $100 one year from now will probably choose _____ since there is a(n) _____ in waiting to use the money.

Which source(s) provide(s) funds for Amazon's investment spending? I. investors who purchase shares of stock in the company II) borrowing from savers

Which financial assets are shares of ownership in a company? I. bonds II) loan-backed securities III) stocks

Use the following to answer questions: -(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. A decrease in savings by the private sector will shift the supply of loanable funds to the _____ and _____ the interest rate.

Use the following to answer questions: -(Figure: The Market for Loanable Funds II) Use Figure: The Market for Loanable Funds II. Other things being equal, if there is an increase in the interest rate above 8%, _____ quantity of loanable funds will be demanded.

Most human capital is provided by government through public education.

Interest rates decreased during the 1980s because expectations of future inflation were lower.

The price in the loanable funds market is the:

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

If a company fails and declares bankruptcy, its physical and financial assets must be used to pay its bondholders before the stockholders can be paid.