Question 1

The government saves when it:

Accepted Answer

A)  has a balanced budget. 
B)  has a budget deficit. 
C)  has a budget surplus. 
D)  borrows by selling bonds. 
A)  has a balanced budget. 
B)  has a budget deficit. 
C)  has a budget surplus. 
D)  borrows by selling bonds.

Question 2

Mutual funds allow investors with a relatively small amount of money to indirectly hold a diversified portfolio, which allows them to invest in stocks more safely than they could otherwise.

Accepted Answer

A) True 
 B)False

Question 3

Securitization is the process of setting up assets by pooling individual loans and selling shares in the pool.

Accepted Answer

A) True 
 B)False

Question 4

National savings in a closed economy is NOT:

Accepted Answer

A)  the sum of private savings plus the government budget balance. 
B)  the total savings in the economy. 
C)  GDP - C - G. 
D)  government spending minus consumption. 
A)  the sum of private savings plus the government budget balance. 
B)  the total savings in the economy. 
C)  GDP - C - G. 
D)  government spending minus consumption.

Question 5

Higher interest rates will lead to increased investment spending.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer questions:  
-(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 11%, the last project undertaken is:

Accepted Answer

A)  G. 
B)  H. 
C)  I. 
D)  J. 
A)  G. 
B)  H. 
C)  I. 
D)  J.

Question 7

If all retail stores announce unexpectedly high sales volumes, holding other things constant, stock prices in the retail sector will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  It is impossible to say how stock prices will change. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  It is impossible to say how stock prices will change.

Question 8

Which item is NOT a financial intermediary?

Accepted Answer

A)  pension funds 
B)  mutual funds 
C)  a life insurance company 
D)  a credit card company 
A)  pension funds 
B)  mutual funds 
C)  a life insurance company 
D)  a credit card company

Question 9

When the demand for housing increased during the early 2000s, the demand for loanable funds decreased and caused the interest rate to decrease.

Accepted Answer

A) True 
 B)False

Question 10

Samantha asks her employer for a 5% raise for the coming year. If the inflation rate during the next year is 5.5%, then her real wage will:

Accepted Answer

A)  increase by 5%. 
B)  decrease by 0.5%. 
C)  decrease by 5%. 
D)  increase by 0.5%. 
A)  increase by 5%. 
B)  decrease by 0.5%. 
C)  decrease by 5%. 
D)  increase by 0.5%.

Question 11

Higher interest rates encourage investment spending.

Accepted Answer

A) True 
 B)False

Question 12

If you are paid $10,500 in one year on a $10,000 loan made today, then your annual interest rate is _____%.

Accepted Answer

A)  0.5 
B)  5 
C)  10 
D)  10.5 
A)  0.5 
B)  5 
C)  10 
D)  10.5

Question 13

Most of Amazon's investment spending is for scholarships for its employees to study the latest thinking in how to distribute goods quickly to consumers.

Accepted Answer

A) True 
 B)False

Question 14

The MOST diversified portfolio in terms of risk is $100,000 worth of stock in:

Accepted Answer

A)  10 companies in the same industry. 
B)  10 companies in two industries. 
C)  10 companies in five industries. 
D)  one company that sells 10 products. 
A)  10 companies in the same industry. 
B)  10 companies in two industries. 
C)  10 companies in five industries. 
D)  one company that sells 10 products.

Question 15

A mutual fund:

Accepted Answer

A)  always includes a base year. 
B)  owns a diversified portfolio. 
C)  always earns a profit. 
D)  offers a lower rate of return for any given level of risk. 
A)  always includes a base year. 
B)  owns a diversified portfolio. 
C)  always earns a profit. 
D)  offers a lower rate of return for any given level of risk.

Question 16

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

Accepted Answer

A)  decrease in the inflation rate. 
B)  increase in the budget deficit. 
C)  decrease in expected business opportunities. 
D)  increase in expected business opportunities. 
A)  decrease in the inflation rate. 
B)  increase in the budget deficit. 
C)  decrease in expected business opportunities. 
D)  increase in expected business opportunities.

Question 17

Interest rates were high during the 1970s and decreased during the 1980s because expected inflation was:

Accepted Answer

A)  high during both decades. 
B)  low during both decades. 
C)  high during the 1970s and decreased during the 1980s. 
D)  low during the 1970s and increased during the 1980s. 
A)  high during both decades. 
B)  low during both decades. 
C)  high during the 1970s and decreased during the 1980s. 
D)  low during the 1970s and increased during the 1980s.

Question 18

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 a decrease in the interest rate below 8%, _____ quantity of loanable funds will be demanded.

Accepted Answer

A)  the same 
B)  a larger 
C)  a smaller 
D)  at first a smaller and then a larger 
A)  the same 
B)  a larger 
C)  a smaller 
D)  at first a smaller and then a larger

Question 19

Financial markets spread the potential gains and losses of borrowing and lending operations among many individuals, therefore decreasing the overall uncertainty. This is an example of:

Accepted Answer

A)  reducing transaction costs. 
B)  reducing risk. 
C)  providing liquidity. 
D)  guaranteeing rates of return. 
A)  reducing transaction costs. 
B)  reducing risk. 
C)  providing liquidity. 
D)  guaranteeing rates of return.

Question 20

Although loan-backed securities provide more diversification than individual loans, they are much less liquid than individual loans.

Accepted Answer

A) True 
 B)False

The government saves when it:

Mutual funds allow investors with a relatively small amount of money to indirectly hold a diversified portfolio, which allows them to invest in stocks more safely than they could otherwise.

Securitization is the process of setting up assets by pooling individual loans and selling shares in the pool.

National savings in a closed economy is NOT:

Higher interest rates will lead to increased investment spending.

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 11%, the last project undertaken is:

If all retail stores announce unexpectedly high sales volumes, holding other things constant, stock prices in the retail sector will:

Which item is NOT a financial intermediary?

When the demand for housing increased during the early 2000s, the demand for loanable funds decreased and caused the interest rate to decrease.

Samantha asks her employer for a 5% raise for the coming year. If the inflation rate during the next year is 5.5%, then her real wage will:

Higher interest rates encourage investment spending.

If you are paid $10,500 in one year on a $10,000 loan made today, then your annual interest rate is _____%.

Most of Amazon's investment spending is for scholarships for its employees to study the latest thinking in how to distribute goods quickly to consumers.

The MOST diversified portfolio in terms of risk is $100,000 worth of stock in:

A mutual fund:

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

Interest rates were high during the 1970s and decreased during the 1980s because expected inflation was:

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 a decrease in the interest rate below 8%, _____ quantity of loanable funds will be demanded.

Financial markets spread the potential gains and losses of borrowing and lending operations among many individuals, therefore decreasing the overall uncertainty. This is an example of:

Although loan-backed securities provide more diversification than individual loans, they are much less liquid than individual loans.

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

The government saves when it:

Mutual funds allow investors with a relatively small amount of money to indirectly hold a diversified portfolio, which allows them to invest in stocks more safely than they could otherwise.

Securitization is the process of setting up assets by pooling individual loans and selling shares in the pool.

National savings in a closed economy is NOT:

Higher interest rates will lead to increased investment spending.

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 11%, the last project undertaken is:

If all retail stores announce unexpectedly high sales volumes, holding other things constant, stock prices in the retail sector will:

Which item is NOT a financial intermediary?

When the demand for housing increased during the early 2000s, the demand for loanable funds decreased and caused the interest rate to decrease.

Samantha asks her employer for a 5% raise for the coming year. If the inflation rate during the next year is 5.5%, then her real wage will:

Higher interest rates encourage investment spending.

If you are paid $10,500 in one year on a $10,000 loan made today, then your annual interest rate is _____%.

Most of Amazon's investment spending is for scholarships for its employees to study the latest thinking in how to distribute goods quickly to consumers.

The MOST diversified portfolio in terms of risk is $100,000 worth of stock in:

A mutual fund:

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

Interest rates were high during the 1970s and decreased during the 1980s because expected inflation was:

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 a decrease in the interest rate below 8%, _____ quantity of loanable funds will be demanded.

Financial markets spread the potential gains and losses of borrowing and lending operations among many individuals, therefore decreasing the overall uncertainty. This is an example of:

Although loan-backed securities provide more diversification than individual loans, they are much less liquid than individual loans.

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