Question 1

To help increase investment spending, the government can:

Accepted Answer

A)  lower taxes on consumption so that disposable income rises. 
B)  lower taxes on the returns from savings so that total savings increase and the interest rate falls. 
C)  raise taxes on the returns from bonds while lowering taxes on stock dividends. 
D)  lower taxes on investment spending while raising taxes on savings so that total tax revenue remains constant. 
A)  lower taxes on consumption so that disposable income rises. 
B)  lower taxes on the returns from savings so that total savings increase and the interest rate falls. 
C)  raise taxes on the returns from bonds while lowering taxes on stock dividends. 
D)  lower taxes on investment spending while raising taxes on savings so that total tax revenue remains constant.

Question 2

Amazon's primary type of investment spending is the purchase of:

Accepted Answer

A)  server farms, or arrays of linked computers. 
B)  health care for its employees. 
C)  stock in Yahoo and Google. 
D)  U.S. Treasury securities. 
A)  server farms, or arrays of linked computers. 
B)  health care for its employees. 
C)  stock in Yahoo and Google. 
D)  U.S. Treasury securities.

Question 3

The supply of loanable funds is _____ sloping because _____ respond to lower interest rates by _____ their quantity supplied of loanable funds.

Accepted Answer

A)  upward; savers; increasing 
B)  upward; investors; decreasing 
C)  upward; savers; decreasing 
D)  downward; investors; increasing 
A)  upward; savers; increasing 
B)  upward; investors; decreasing 
C)  upward; savers; decreasing 
D)  downward; investors; increasing

Question 4

Since money from both domestic and foreign savers must eventually be repaid with interest, capital inflow has the same effect on the national economy as national savings.

Accepted Answer

A) True 
 B)False

Question 5

In an open economy, government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was:

Accepted Answer

A)  a net capital inflow of $10 billion. 
B)  capital inflows of $10 billion and capital outflows of $20 billion. 
C)  a trade surplus of $20 billion and a financial deficit of $20 billion. 
D)  a net capital outflow of $10 billion. 
A)  a net capital inflow of $10 billion. 
B)  capital inflows of $10 billion and capital outflows of $20 billion. 
C)  a trade surplus of $20 billion and a financial deficit of $20 billion. 
D)  a net capital outflow of $10 billion.

Question 6

Fundamentals are the underlying determinants of a company's future profits.

Accepted Answer

A) True 
 B)False

Question 7

The present value of $1 realized one year from now equals:

Accepted Answer

A)  $1 / (1 + r). 
B)  $1 * (1 + r). 
C)  1 + r. 
D)  1 / r. 
A)  $1 / (1 + r). 
B)  $1 * (1 + r). 
C)  1 + r. 
D)  1 / r.

Question 8

If interest rates on bonds rise, holding other things constant, stock prices 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 9

Use the following to answer questions:  
-(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Northlandia?

Accepted Answer

A)  -10% 
B)  0% 
C)  10% 
D)  20% 
A)  -10% 
B)  0% 
C)  10% 
D)  20%

Question 10

Governments can save when:

Accepted Answer

A)  taxes are less than expenditures. 
B)  taxes are greater than expenditures. 
C)  the government borrows to finance its expenditures. 
D)  the president insists that Congress balance the budget. 
A)  taxes are less than expenditures. 
B)  taxes are greater than expenditures. 
C)  the government borrows to finance its expenditures. 
D)  the president insists that Congress balance the budget.

Question 11

If there is an increase in the government budget deficit, the _____ loanable funds will _____, interest rates will _____, and the amount of borrowing will _____.

Accepted Answer

A)  demand for; increase; increase; increase 
B)  demand for; decrease; decrease; decrease 
C)  supply of; increase; decrease; increase 
D)  supply of; decrease; increase; decrease 
A)  demand for; increase; increase; increase 
B)  demand for; decrease; decrease; decrease 
C)  supply of; increase; decrease; increase 
D)  supply of; decrease; increase; decrease

Question 12

Privately held companies are owned by an individual or a few partners, who get to keep all of the company's profit.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions:  
-(Figure: Crowding Out) Use Figure: Crowding Out. The demand for loanable funds curve DLF1 will shift to DLF2 when there is a(n):

Accepted Answer

A)  decrease in the government budget deficit. 
B)  increase in the government budget deficit. 
C)  increase in private savings. 
D)  decrease in private savings. 
A)  decrease in the government budget deficit. 
B)  increase in the government budget deficit. 
C)  increase in private savings. 
D)  decrease in private savings.

Question 14

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

Accepted Answer

A)  $15.9 trillion. 
B)  $4.9 trillion. 
C)  $2.1 trillion. 
D)  -$0.5 trillion. 
A)  $15.9 trillion. 
B)  $4.9 trillion. 
C)  $2.1 trillion. 
D)  -$0.5 trillion.

Question 15

When a corporation issues a bond, it is an asset for the corporation and a liability for the purchaser of the bond.

Accepted Answer

A) True 
 B)False

Question 16

If you are paid $5,500 in one year on a $5,000 loan made today, then your annual interest rate is _____%.

Accepted Answer

A)  0.5 
B)  10 
C)  1 
D)  5 
A)  0.5 
B)  10 
C)  1 
D)  5

Question 17

If the government increases its borrowing, then at every interest rate there is a(n) _____ funds.

Accepted Answer

A)  additional supply of 
B)  additional demand for 
C)  decrease in the supply of 
D)  increase in the supply of 
A)  additional supply of 
B)  additional demand for 
C)  decrease in the supply of 
D)  increase in the supply of

Question 18

A person who is risk-averse:

Accepted Answer

A)  is more sensitive to a loss than to a gain of an equal dollar amount. 
B)  is less sensitive to a loss than to a gain of an equal dollar amount. 
C)  is willing to pay any price to avoid risk. 
D)  enjoys taking risks, especially in financial markets. 
A)  is more sensitive to a loss than to a gain of an equal dollar amount. 
B)  is less sensitive to a loss than to a gain of an equal dollar amount. 
C)  is willing to pay any price to avoid risk. 
D)  enjoys taking risks, especially in financial markets.

Question 19

Which asset is the LEAST liquid?

Accepted Answer

A)  a U.S. government bond 
B)  100 shares of Apple stock 
C)  money in a checking account 
D)  a 2010 Toyota Camry 
A)  a U.S. government bond 
B)  100 shares of Apple stock 
C)  money in a checking account 
D)  a 2010 Toyota Camry

Question 20

The three tasks of a financial system do NOT include:

Accepted Answer

A)  reduction of transaction costs. 
B)  risk management. 
C)  provision of liquidity. 
D)  determination of fiscal policy. 
A)  reduction of transaction costs. 
B)  risk management. 
C)  provision of liquidity. 
D)  determination of fiscal policy.

To help increase investment spending, the government can:

Amazon's primary type of investment spending is the purchase of:

The supply of loanable funds is ___ sloping because _ respond to lower interest rates by ___ their quantity supplied of loanable funds.

Since money from both domestic and foreign savers must eventually be repaid with interest, capital inflow has the same effect on the national economy as national savings.

In an open economy, government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was:

Fundamentals are the underlying determinants of a company's future profits.

The present value of $1 realized one year from now equals:

If interest rates on bonds rise, holding other things constant, stock prices will:

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Northlandia?

Governments can save when:

If there is an increase in the government budget deficit, the ___ loanable funds will _, interest rates will _, and the amount of borrowing will ___.

Privately held companies are owned by an individual or a few partners, who get to keep all of the company's profit.

Use the following to answer questions: -(Figure: Crowding Out) Use Figure: Crowding Out. The demand for loanable funds curve D_LF₁ will shift to D_LF₂ when there is a(n):

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

When a corporation issues a bond, it is an asset for the corporation and a liability for the purchaser of the bond.

If you are paid $5,500 in one year on a $5,000 loan made today, then your annual interest rate is _____%.

If the government increases its borrowing, then at every interest rate there is a(n) _____ funds.

A person who is risk-averse:

Which asset is the LEAST liquid?

The three tasks of a financial system do NOT include:

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

To help increase investment spending, the government can:

Amazon's primary type of investment spending is the purchase of:

The supply of loanable funds is _____ sloping because _____ respond to lower interest rates by _____ their quantity supplied of loanable funds.

Since money from both domestic and foreign savers must eventually be repaid with interest, capital inflow has the same effect on the national economy as national savings.

In an open economy, government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was:

Fundamentals are the underlying determinants of a company's future profits.

The present value of $1 realized one year from now equals:

If interest rates on bonds rise, holding other things constant, stock prices will:

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Northlandia?

Governments can save when:

If there is an increase in the government budget deficit, the _____ loanable funds will _____, interest rates will _____, and the amount of borrowing will _____.

Privately held companies are owned by an individual or a few partners, who get to keep all of the company's profit.

Use the following to answer questions: -(Figure: Crowding Out) Use Figure: Crowding Out. The demand for loanable funds curve DLF1 will shift to DLF2 when there is a(n):

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

When a corporation issues a bond, it is an asset for the corporation and a liability for the purchaser of the bond.

If you are paid $5,500 in one year on a $5,000 loan made today, then your annual interest rate is _____%.

If the government increases its borrowing, then at every interest rate there is a(n) _____ funds.

A person who is risk-averse:

Which asset is the LEAST liquid?

The three tasks of a financial system do NOT include:

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 supply of loanable funds is ___ sloping because _ respond to lower interest rates by ___ their quantity supplied of loanable funds.

If there is an increase in the government budget deficit, the ___ loanable funds will _, interest rates will _, and the amount of borrowing will ___.

Use the following to answer questions: -(Figure: Crowding Out) Use Figure: Crowding Out. The demand for loanable funds curve D_LF₁ will shift to D_LF₂ when there is a(n):