Question 1

In a closed economy, the savings-investment spending identity is:

Accepted Answer

A)  I = GDP - C - G + (IM - NX). 
B)  NS = GDP + I. 
C)  NS = GDP + (C - T + TR) + (T - TR -G). 
D)  I = GDP - C - G. 
A)  I = GDP - C - G + (IM - NX). 
B)  NS = GDP + I. 
C)  NS = GDP + (C - T + TR) + (T - TR -G). 
D)  I = GDP - C - G.

Question 2

An amount that would equal a particular future value if deposited today at the prevailing interest rate is the:

Accepted Answer

A)  present value. 
B)  inflation rate. 
C)  discount premium. 
D)  market index. 
A)  present value. 
B)  inflation rate. 
C)  discount premium. 
D)  market index.

Question 3

All other things unchanged, an increase in demand for loanable funds would MOST likely be caused by a(n):

Accepted Answer

A)  important forecast predicting solid economic growth. 
B)  important forecast predicting a recession. 
C)  increase in the market interest rate. 
D)  increase in the cost of new capital goods. 
A)  important forecast predicting solid economic growth. 
B)  important forecast predicting a recession. 
C)  increase in the market interest rate. 
D)  increase in the cost of new capital goods.

Question 4

A household's wealth is always equal to its income in the current year.

Accepted Answer

A) True 
 B)False

Question 5

Which asset is the MOST liquid?

Accepted Answer

A)  a house 
B)  100 shares of Apple stock 
C)  money in a checking account 
D)  a life insurance policy 
A)  a house 
B)  100 shares of Apple stock 
C)  money in a checking account 
D)  a life insurance policy

Question 6

Inflation:

Accepted Answer

A)  was very low in the 1970s and increased in the 1980s. 
B)  was very high in the 1970s and decreased in the 1980s. 
C)  steadily increased from 1960 through 2016. 
D)  steadily decreased from 1960 through 2016. 
A)  was very low in the 1970s and increased in the 1980s. 
B)  was very high in the 1970s and decreased in the 1980s. 
C)  steadily increased from 1960 through 2016. 
D)  steadily decreased from 1960 through 2016.

Question 7

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is private saving?

Accepted Answer

A)  $4 trillion 
B)  $2.5 trillion 
C)  $3.5 trillion 
D)  -$0.5 trillion 
A)  $4 trillion 
B)  $2.5 trillion 
C)  $3.5 trillion 
D)  -$0.5 trillion

Question 8

When corporations need to borrow large amounts of money, they can minimize their transaction costs by getting many small loans directly from many people.

Accepted Answer

A) True 
 B)False

Question 9

Diversification in investment is achieved when:

Accepted Answer

A)  the government invests in several projects of different lengths to increase total output. 
B)  a business produces multiple unrelated products so that the firm can maximize profit. 
C)  an economy trades with multiple trading partners for maximum benefit. 
D)  an individual invests in several assets with independent or unrelated risks so that total risk from loss is reduced. 
A)  the government invests in several projects of different lengths to increase total output. 
B)  a business produces multiple unrelated products so that the firm can maximize profit. 
C)  an economy trades with multiple trading partners for maximum benefit. 
D)  an individual invests in several assets with independent or unrelated risks so that total risk from loss is reduced.

Question 10

The United States is a net recipient of foreign savings.

Accepted Answer

A)  This has never happened before. 
B)  This is bad because we are borrowing money from overseas. 
C)  This is bad because we are losing control over our own destiny. 
D)  This has been true throughout much of our history. 
A)  This has never happened before. 
B)  This is bad because we are borrowing money from overseas. 
C)  This is bad because we are losing control over our own destiny. 
D)  This has been true throughout much of our history.

Question 11

The loanable funds market maximizes the:

Accepted Answer

A)  interest rate to savers. 
B)  rate of return from borrowers. 
C)  gains from trade between lenders and borrowers. 
D)  amount of investment spending in the economy. 
A)  interest rate to savers. 
B)  rate of return from borrowers. 
C)  gains from trade between lenders and borrowers. 
D)  amount of investment spending in the economy.

Question 12

The government saves when tax revenue:

Accepted Answer

A)  is less than government spending. 
B)  is more than government spending. 
C)  equals government spending. 
D)  is positive. 
A)  is less than government spending. 
B)  is more than government spending. 
C)  equals government spending. 
D)  is positive.

Question 13

Suppose that Ann bought a share of General Motors stock. The stock is a(n) _____ for Ann and a(n) _____ for General Motors.

Accepted Answer

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

Question 14

When interest rates increase, the demand for commercial and residential real estate will _____ and the price of real estate 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 15

The budget balance equals:

Accepted Answer

A)  taxes minus government spending. 
B)  transfers minus government spending. 
C)  taxes plus government spending. 
D)  savings plus taxes. 
A)  taxes minus government spending. 
B)  transfers minus government spending. 
C)  taxes plus government spending. 
D)  savings plus taxes.

Question 16

Financial assets that carry more risk:

Accepted Answer

A)  usually have a lower rate of return. 
B)  usually have a higher rate of return. 
C)  are purchased by risk-averse buyers. 
D)  are a hedge against the future. 
A)  usually have a lower rate of return. 
B)  usually have a higher rate of return. 
C)  are purchased by risk-averse buyers. 
D)  are a hedge against the future.

Question 17

Compared with bonds, stocks generally provide a _____ return and carry a _____ financial risk.

Accepted Answer

A)  lower; lower 
B)  lower; higher 
C)  higher; lower 
D)  higher; higher 
A)  lower; lower 
B)  lower; higher 
C)  higher; lower 
D)  higher; higher

Question 18

An increase in the interest rate causes a decrease in investment by shifting the loanable funds demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 19

An increase in the level of business opportunities will not change investment spending.

Accepted Answer

A) True 
 B)False

Question 20

Use the following to answer question 79:  
-(Table: Loanable Funds) Use Table: Loanable Funds. At what interest rate will the market for loanable funds be in equilibrium?

Accepted Answer

A)  7% 
B)  6% 
C)  5% 
D)  4% 
A)  7% 
B)  6% 
C)  5% 
D)  4%

In a closed economy, the savings-investment spending identity is:

An amount that would equal a particular future value if deposited today at the prevailing interest rate is the:

All other things unchanged, an increase in demand for loanable funds would MOST likely be caused by a(n):

A household's wealth is always equal to its income in the current year.

Which asset is the MOST liquid?

Inflation:

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is private saving?

When corporations need to borrow large amounts of money, they can minimize their transaction costs by getting many small loans directly from many people.

Diversification in investment is achieved when:

The United States is a net recipient of foreign savings.

The loanable funds market maximizes the:

The government saves when tax revenue:

Suppose that Ann bought a share of General Motors stock. The stock is a(n) _ for Ann and a(n) _ for General Motors.

When interest rates increase, the demand for commercial and residential real estate will _ and the price of real estate will _.

The budget balance equals:

Financial assets that carry more risk:

Compared with bonds, stocks generally provide a _ return and carry a _ financial risk.

An increase in the interest rate causes a decrease in investment by shifting the loanable funds demand curve to the left.

An increase in the level of business opportunities will not change investment spending.

Use the following to answer question 79: -(Table: Loanable Funds) Use Table: Loanable Funds. At what interest rate will the market for loanable funds be in equilibrium?

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

In a closed economy, the savings-investment spending identity is:

An amount that would equal a particular future value if deposited today at the prevailing interest rate is the:

All other things unchanged, an increase in demand for loanable funds would MOST likely be caused by a(n):

A household's wealth is always equal to its income in the current year.

Which asset is the MOST liquid?

Inflation:

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is private saving?

When corporations need to borrow large amounts of money, they can minimize their transaction costs by getting many small loans directly from many people.

Diversification in investment is achieved when:

The United States is a net recipient of foreign savings.

The loanable funds market maximizes the:

The government saves when tax revenue:

Suppose that Ann bought a share of General Motors stock. The stock is a(n) _____ for Ann and a(n) _____ for General Motors.

When interest rates increase, the demand for commercial and residential real estate will _____ and the price of real estate will _____.

The budget balance equals:

Financial assets that carry more risk:

Compared with bonds, stocks generally provide a _____ return and carry a _____ financial risk.

An increase in the interest rate causes a decrease in investment by shifting the loanable funds demand curve to the left.

An increase in the level of business opportunities will not change investment spending.

Use the following to answer question 79: -(Table: Loanable Funds) Use Table: Loanable Funds. At what interest rate will the market for loanable funds be in equilibrium?

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

Suppose that Ann bought a share of General Motors stock. The stock is a(n) _ for Ann and a(n) _ for General Motors.

When interest rates increase, the demand for commercial and residential real estate will _ and the price of real estate will _.

Compared with bonds, stocks generally provide a _ return and carry a _ financial risk.