Question 1

Compared to bondholders, stockholders

Accepted Answer

A) face higher risk and have the potential for higher returns. 
B) face higher risk but receive a fixed payment. 
C) face lower risk and have the potential for higher returns. 
D) face lower risk but receive a fixed payment. 
A) face higher risk and have the potential for higher returns. 
B) face higher risk but receive a fixed payment. 
C) face lower risk and have the potential for higher returns. 
D) face lower risk but receive a fixed payment.

Question 2

Which of the following is a certificate of indebtedness?

Accepted Answer

A) stocks and bonds 
B) stocks but not bonds 
C) bonds but not stocks 
D) neither stocks nor bonds 
A) stocks and bonds 
B) stocks but not bonds 
C) bonds but not stocks 
D) neither stocks nor bonds

Question 3

Volume, as reported in stock tables, refers to the

Accepted Answer

A) number of shares traded. 
B) percentage of shares outstanding traded. 
C) number of shares traded times the price they sold at. 
D) number of shares of a company traded divided by the shares of all companies traded. 
A) number of shares traded. 
B) percentage of shares outstanding traded. 
C) number of shares traded times the price they sold at. 
D) number of shares of a company traded divided by the shares of all companies traded.

Question 4

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,

Accepted Answer

A) invest in physical capital. 
B) use equity finance. 
C) sell bonds. 
D) purchase bonds. 
A) invest in physical capital. 
B) use equity finance. 
C) sell bonds. 
D) purchase bonds.

Question 5

Other things the same, which bond would you expect to pay the highest interest rate?

Accepted Answer

A) a bond issued by the U.S. government 
B) a bond issued by Microsoft Corporation 
C) a bond issued by the state of Montana 
D) a bond issued by a new chain of Brazilian-style restaurants 
A) a bond issued by the U.S. government 
B) a bond issued by Microsoft Corporation 
C) a bond issued by the state of Montana 
D) a bond issued by a new chain of Brazilian-style restaurants

Question 6

Generally, if people begin to expect a company to have higher future profits, the price of the company's stock will begin to decrease.

Accepted Answer

A) True 
 B)False

Question 7

In the national income accounting identity showing the equality between national saving and investment, what are the algebraic expressions for private saving and public saving?

Accepted Answer

Private saving is Y

Question 8

Lenders buy bonds and borrowers sell them.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a financial-market transaction?

Accepted Answer

A) A saver buys shares in a mutual fund. 
B) A saver deposits money into a credit union. 
C) A saver buys a bond a corporation has just issued so it can purchase capital. 
D) None of the above is correct. 
A) A saver buys shares in a mutual fund. 
B) A saver deposits money into a credit union. 
C) A saver buys a bond a corporation has just issued so it can purchase capital. 
D) None of the above is correct.

Question 10

Which of the following bond buyers did not buy the bond that best met his or her objective?

Accepted Answer

A) Jackie wanted a bond with a high interest rate and was willing to take a lot of risk. She purchased a junk bond. 
B) Andrew wanted a bond that would allow him to legally avoid paying federal income taxes. He purchased a municipal bond. 
C) Suzy wanted to purchase a bond whose seller was unlikely to default. She purchased a bond that Standards and Poor's rated a low credit risk. 
D) Cecilia held long-term bonds rather than short-term bonds to avoid risk. 
A) Jackie wanted a bond with a high interest rate and was willing to take a lot of risk. She purchased a junk bond. 
B) Andrew wanted a bond that would allow him to legally avoid paying federal income taxes. He purchased a municipal bond. 
C) Suzy wanted to purchase a bond whose seller was unlikely to default. She purchased a bond that Standards and Poor's rated a low credit risk. 
D) Cecilia held long-term bonds rather than short-term bonds to avoid risk.

Question 11

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium.  
-Refer to Table 26-3. Determine the quantity of loanable funds demanded.

Accepted Answer

A) $1.8 trillion 
B) $1.6 trillion 
C) $1.4 trillion 
D) $0.8 trillion 
A) $1.8 trillion 
B) $1.6 trillion 
C) $1.4 trillion 
D) $0.8 trillion

Question 12

Scenario 26-1. Assume the following information for an imaginary, closed economy.
GDP = $100,000; taxes = $22,000; government purchases = $25,000; national
saving = $15,000.
-Refer to Scenario 26-1. This economy's government is running a

Accepted Answer

A) budget surplus of $3,000. 
B) budget surplus of $12,000. 
C) budget deficit of $3,000. 
D) budget deficit of $12,000. 
A) budget surplus of $3,000. 
B) budget surplus of $12,000. 
C) budget deficit of $3,000. 
D) budget deficit of $12,000.

Question 13

Ethan purchases a new house for $170,000. Ethan's purchase of the house contributes $170,000 to which magnitude in the identity Y = C + I + G?

Accepted Answer

A) C 
B) I 
C) G 
D) None of the above are correct. 
A) C 
B) I 
C) G 
D) None of the above are correct.

Question 14

The identity that shows that total income and total expenditure are equal is

Accepted Answer

A) GDP = Y. 
B) Y = DI + T + NX. 
C) GDP = GNP - NX. 
D) Y = C + I + G + NX. 
A) GDP = Y. 
B) Y = DI + T + NX. 
C) GDP = GNP - NX. 
D) Y = C + I + G + NX.

Question 15

When a country saves a larger portion of its GDP than it did before, it will have

Accepted Answer

A) more capital and higher productivity. 
B) more capital and lower productivity. 
C) less capital and higher productivity. 
D) less capital and lower productivity. 
A) more capital and higher productivity. 
B) more capital and lower productivity. 
C) less capital and higher productivity. 
D) less capital and lower productivity.

Question 16

If the supply of and demand for loanable funds both shift left, which of the following necessarily happens?

Accepted Answer

A) the equilibrium interest rate falls 
B) the equilibrium interest rate rises 
C) the equilibrium quantity of loanable funds rises 
D) the equilibrium quantity of loanable funds falls 
A) the equilibrium interest rate falls 
B) the equilibrium interest rate rises 
C) the equilibrium quantity of loanable funds rises 
D) the equilibrium quantity of loanable funds falls

Question 17

Which of the following statements is correct?

Accepted Answer

A) NASDAQ is an important stock exchange in the United States. 
B) The Standard & Poor's 500 Index and the New York Stock Exchange are two examples of stock indexes. 
C) The most significant influence on the demand for a corporation's stock is the number of shares of the stock that the corporation has issued. 
D) All of the above are correct. 
A) NASDAQ is an important stock exchange in the United States. 
B) The Standard & Poor's 500 Index and the New York Stock Exchange are two examples of stock indexes. 
C) The most significant influence on the demand for a corporation's stock is the number of shares of the stock that the corporation has issued. 
D) All of the above are correct.

Question 18

A low price-earnings ratio indicates that either the stock is

Accepted Answer

A) undervalued or people are relatively optimistic about the corporation's prospects. 
B) overvalued or people are relatively optimistic about the corporation's prospects. 
C) overvalued or people are relatively pessimistic about the corporation's prospects. 
D) undervalued or people are relatively pessimistic about the corporation's prospects. 
A) undervalued or people are relatively optimistic about the corporation's prospects. 
B) overvalued or people are relatively optimistic about the corporation's prospects. 
C) overvalued or people are relatively pessimistic about the corporation's prospects. 
D) undervalued or people are relatively pessimistic about the corporation's prospects.

Question 19

When the government increases spending (holding taxes constant), the budget balance _____. This causes the interest rate in the market for loanable funds to _____ and investment to _____.

Accepted Answer

falls, inc

Question 20

Suppose private saving in a closed economy is $12b and investment is $10b.

Accepted Answer

A) National saving must equal $12b. 
B) Public saving must equal $2b. 
C) The government budget surplus must equal $2b. 
D) The government budget deficit must equal $2b. 
A) National saving must equal $12b. 
B) Public saving must equal $2b. 
C) The government budget surplus must equal $2b. 
D) The government budget deficit must equal $2b.

Exam 26: Saving, Investment, and the Financial System

Compared to bondholders, stockholders

Which of the following is a certificate of indebtedness?

Volume, as reported in stock tables, refers to the

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,

Other things the same, which bond would you expect to pay the highest interest rate?

Generally, if people begin to expect a company to have higher future profits, the price of the company's stock will begin to decrease.

In the national income accounting identity showing the equality between national saving and investment, what are the algebraic expressions for private saving and public saving?

Lenders buy bonds and borrowers sell them.

Which of the following is a financial-market transaction?

Which of the following bond buyers did not buy the bond that best met his or her objective?

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. -Refer to Table 26-3. Determine the quantity of loanable funds demanded.

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. -Refer to Scenario 26-1. This economy's government is running a

Ethan purchases a new house for $170,000. Ethan's purchase of the house contributes $170,000 to which magnitude in the identity Y = C + I + G?

The identity that shows that total income and total expenditure are equal is

When a country saves a larger portion of its GDP than it did before, it will have

If the supply of and demand for loanable funds both shift left, which of the following necessarily happens?

Which of the following statements is correct?

A low price-earnings ratio indicates that either the stock is

When the government increases spending (holding taxes constant), the budget balance _____. This causes the interest rate in the market for loanable funds to _____ and investment to _____.

Suppose private saving in a closed economy is $12b and investment is $10b.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

When the government increases spending (holding taxes constant), the budget balance ___. This causes the interest rate in the market for loanable funds to _ and investment to ___.