Question 1

Which of the following are effects of an increased budget deficit?

Accepted Answer

A) the supply of loanable funds does not change; a higher interest rate reduces private saving 
B) the supply of loanable funds does not change; a higher interest rate raises private saving 
C) at any interest rate the supply of loanable funds is less; a higher interest rate reduces private saving 
D) at any interest rate the supply of loanable funds is less; a higher interest rate raises private saving 
A) the supply of loanable funds does not change; a higher interest rate reduces private saving 
B) the supply of loanable funds does not change; a higher interest rate raises private saving 
C) at any interest rate the supply of loanable funds is less; a higher interest rate reduces private saving 
D) at any interest rate the supply of loanable funds is less; a higher interest rate raises private saving

Question 2

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.  
-Refer to Figure 26-3. What, specifically, does the label on the vertical axis, i, represent?

Accepted Answer

A) the nominal interest rate 
B) the real interest rate 
C) the inflation rate 
D) the dividend yield 
A) the nominal interest rate 
B) the real interest rate 
C) the inflation rate 
D) the dividend yield

Question 3

When the U.S. government is in debt during a given year, it follows that its budget is in deficit for that year.

Accepted Answer

A) True 
 B)False

Question 4

Bond A and Bond B are identical except Bond B has a longer term. Therefore, we expect Bond _____ to pay a higher rate of interest.

Accepted Answer

The answer of Bond A and Bond B are identical...

Question 5

An increase in the budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would shift the demand for loanable funds to the right?

Accepted Answer

A) income tax increases 
B) government expenditures increase 
C) the interest rate falls 
D) Congress and the president pass an investment tax credit 
A) income tax increases 
B) government expenditures increase 
C) the interest rate falls 
D) Congress and the president pass an investment tax credit

Question 7

A higher interest rate makes _____ less attractive. Therefore the quantity of loanable funds demanded decreases.

Accepted Answer

The answer of A higher interest rate makes _____ less...

Question 8

Institutions that help to match one person's saving with another person's investment are collectively called the

Accepted Answer

A) Federal Reserve system. 
B) banking system. 
C) monetary system. 
D) financial system. 
A) Federal Reserve system. 
B) banking system. 
C) monetary system. 
D) financial system.

Question 9

The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

Accepted Answer

A) earnings. 
B) retained earnings. 
C) economic, or real, profit. 
D) dividend. 
A) earnings. 
B) retained earnings. 
C) economic, or real, profit. 
D) dividend.

Question 10

A bond buyer is a

Accepted Answer

A) saver. Bond buyers must hold their bonds until maturity. 
B) saver. Bond buyers may sell their bonds prior to maturity. 
C) borrower. Bond buyers must hold their bonds until maturity. 
D) borrower. Bond buyers may sell their bonds prior to maturity. 
A) saver. Bond buyers must hold their bonds until maturity. 
B) saver. Bond buyers may sell their bonds prior to maturity. 
C) borrower. Bond buyers must hold their bonds until maturity. 
D) borrower. Bond buyers may sell their bonds prior to maturity.

Question 11

Which of the following events could explain an increase in interest rates together with a decrease in investment?

Accepted Answer

A) The government budget went from surplus to deficit. 
B) The government instituted an investment tax credit. 
C) The government reduced the tax rate on savings. 
D) None of the above is correct. 
A) The government budget went from surplus to deficit. 
B) The government instituted an investment tax credit. 
C) The government reduced the tax rate on savings. 
D) None of the above is correct.

Question 12

People who buy newly issued stock in a corporation such as Crate and Barrel provide

Accepted Answer

A) debt finance and so become part owners of Crate and Barrel. 
B) debt finance and so become creditors of Crate and Barrel. 
C) equity finance and so become part owners of Crate and Barrel. 
D) equity finance and so become creditors of Crate and Barrel. 
A) debt finance and so become part owners of Crate and Barrel. 
B) debt finance and so become creditors of Crate and Barrel. 
C) equity finance and so become part owners of Crate and Barrel. 
D) equity finance and so become creditors of Crate and Barrel.

Question 13

A corporation's earnings are the amount of revenue it receives for the sale of its products

Accepted Answer

A) minus its cost of production as measured by its accountants. Earnings must be paid out as dividends. 
B) minus its cost of production as measured by its accountants. Earnings may be paid out as dividends or retained by the corporation. 
C) minus its direct and indirect costs as measured by its economists. Earnings must be paid out as dividends. 
D) minus its direct and indirect cost as measure by its economists. Earnings may be paid out as dividends or retained by the corporation. 
A) minus its cost of production as measured by its accountants. Earnings must be paid out as dividends. 
B) minus its cost of production as measured by its accountants. Earnings may be paid out as dividends or retained by the corporation. 
C) minus its direct and indirect costs as measured by its economists. Earnings must be paid out as dividends. 
D) minus its direct and indirect cost as measure by its economists. Earnings may be paid out as dividends or retained by the corporation.

Question 14

As chief financial officer you sell newly issued bonds on behalf of your firm. Your firm is

Accepted Answer

A) borrowing directly. 
B) borrowing indirectly. 
C) lending directly. 
D) lending indirectly. 
A) borrowing directly. 
B) borrowing indirectly. 
C) lending directly. 
D) lending indirectly.

Question 15

The interest rate will _____ and the quantity of loanable funds invested will _____ when the government decreases the budget deficit.

Accepted Answer

The answer of The interest rate will _____ and the...

Question 16

A closed economy

Accepted Answer

A) does not engage in international trade of goods and services. 
B) does not engage in international borrowing or lending. 
C) both A and B 
D) engages in international borrowing and lending. 
A) does not engage in international trade of goods and services. 
B) does not engage in international borrowing or lending. 
C) both A and B 
D) engages in international borrowing and lending.

Question 17

Public saving is equal to national saving minus private saving.

Accepted Answer

A) True 
 B)False

Question 18

Other things the same, the higher the rate of saving and investment in a country, the higher will be the standard of living in the future.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would necessarily increase the equilibrium interest rate?

Accepted Answer

A) The demand for and the supply of loanable funds shift right. 
B) The demand for and the supply of loanable funds shift left. 
C) The demand for loanable funds shifts right and the supply of loanable funds shifts left. 
D) The demand for loanable funds shifts left and the supply of loanable funds shifts right. 
A) The demand for and the supply of loanable funds shift right. 
B) The demand for and the supply of loanable funds shift left. 
C) The demand for loanable funds shifts right and the supply of loanable funds shifts left. 
D) The demand for loanable funds shifts left and the supply of loanable funds shifts right.

Question 20

An increase in the government budget deficit causes national saving to _____, the interest rate to _____, and investment to _____.

Accepted Answer

decrease,

Exam 26: Saving, Investment, and the Financial System

Which of the following are effects of an increased budget deficit?

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. What, specifically, does the label on the vertical axis, i, represent?

When the U.S. government is in debt during a given year, it follows that its budget is in deficit for that year.

Bond A and Bond B are identical except Bond B has a longer term. Therefore, we expect Bond _____ to pay a higher rate of interest.

An increase in the budget deficit shifts the demand for loanable funds to the right.

Which of the following would shift the demand for loanable funds to the right?

A higher interest rate makes _____ less attractive. Therefore the quantity of loanable funds demanded decreases.

Institutions that help to match one person's saving with another person's investment are collectively called the

The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

A bond buyer is a

Which of the following events could explain an increase in interest rates together with a decrease in investment?

People who buy newly issued stock in a corporation such as Crate and Barrel provide

A corporation's earnings are the amount of revenue it receives for the sale of its products

As chief financial officer you sell newly issued bonds on behalf of your firm. Your firm is

The interest rate will _____ and the quantity of loanable funds invested will _____ when the government decreases the budget deficit.

A closed economy

Public saving is equal to national saving minus private saving.

Other things the same, the higher the rate of saving and investment in a country, the higher will be the standard of living in the future.

Which of the following would necessarily increase the equilibrium interest rate?

An increase in the government budget deficit causes national saving to _____, the interest rate to _____, and investment to _____.

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

The interest rate will _ and the quantity of loanable funds invested will _ when the government decreases the budget deficit.

An increase in the government budget deficit causes national saving to ___, the interest rate to _, and investment to ___.