Question 1

A policy that induces people to save more shifts

Accepted Answer

A) the supply of loanable funds rightward and increases investment. 
B) the supply of loanable funds leftward and decreases investment. 
C) the supply of loanable funds rightward and decreases investment. 
D) the supply of loanable funds leftward and increases investment. 
A) the supply of loanable funds rightward and increases investment. 
B) the supply of loanable funds leftward and decreases investment. 
C) the supply of loanable funds rightward and decreases investment. 
D) the supply of loanable funds leftward and increases investment.

Question 2

The single most important piece of information about a stock is its

Accepted Answer

A) term. 
B) dividend. 
C) daily volume. 
D) price. 
A) term. 
B) dividend. 
C) daily volume. 
D) price.

Question 3

National saving is equal to Y - T - C.

Accepted Answer

A) True 
 B)False

Question 4

Historically, the typical price-earnings ratio for stocks is about

Accepted Answer

A) 3 
B) 8 
C) 15 
D) 26 
A) 3 
B) 8 
C) 15 
D) 26

Question 5

​Rob wants to create a personal trainer program service and needs to pay for equipment and gym space. He can finance this capital investment by

Accepted Answer

A) ​borrowing money from a friend. 
B) selling shares of future profits. 
C) ​using his own savings. 
D) ​All of the above. 
A) ​borrowing money from a friend. 
B) selling shares of future profits. 
C) ​using his own savings. 
D) ​All of the above.

Question 6

When the government's budget deficit increases

Accepted Answer

A) the government is borrowing less and public savings falls. 
B) the government is borrowing less and public savings increases. 
C) the government is borrowing more and public savings falls. 
D) the government is borrowing more and public savings increases. 
A) the government is borrowing less and public savings falls. 
B) the government is borrowing less and public savings increases. 
C) the government is borrowing more and public savings falls. 
D) the government is borrowing more and public savings increases.

Question 7

In a closed economy, Y - C - G equals _____. The variable Y is _____, C is _____, and G is _____.

Accepted Answer

national saving/inve

Question 8

Queen City Sausage stock is selling at $40 per share, it has retained earnings of $1.00 per share, and dividends of $1.00 per share. What is the price-earnings ratio and what is the dividend yield?

Accepted Answer

A) 20, 2.5 percent. 
B) 20, 5 percent. 
C) 40, 2.5 percent. 
D) 40, 5 percent. 
A) 20, 2.5 percent. 
B) 20, 5 percent. 
C) 40, 2.5 percent. 
D) 40, 5 percent.

Question 9

In a closed economy, private saving is

Accepted Answer

A) the amount of income that households have left after paying for their taxes and consumption. 
B) the amount of income that businesses have left after paying for the factors of production. 
C) the amount of tax revenue that the government has left after paying for its spending. 
D) always equal to investment. 
A) the amount of income that households have left after paying for their taxes and consumption. 
B) the amount of income that businesses have left after paying for the factors of production. 
C) the amount of tax revenue that the government has left after paying for its spending. 
D) always equal to investment.

Question 10

According to the loanable funds model, which of the following events would result in higher interest rates and greater saving?

Accepted Answer

A) Firms become pessimistic about the future and, as a result, they cut back on their plans to buy new equipment and build new factories. 
B) The government goes from running a budget deficit to running a budget surplus. 
C) Congress passes a reform of the tax laws that encourages greater saving. 
D) Congress passes a reform of the tax laws that encourages greater investment. 
A) Firms become pessimistic about the future and, as a result, they cut back on their plans to buy new equipment and build new factories. 
B) The government goes from running a budget deficit to running a budget surplus. 
C) Congress passes a reform of the tax laws that encourages greater saving. 
D) Congress passes a reform of the tax laws that encourages greater investment.

Question 11

Other things the same, an increase in the interest rate

Accepted Answer

A) would shift the demand for loanable funds to the right. 
B) would shift the demand for loanable funds to the left. 
C) would increase the quantity of loanable funds demanded. 
D) would decrease the quantity of loanable funds demanded. 
A) would shift the demand for loanable funds to the right. 
B) would shift the demand for loanable funds to the left. 
C) would increase the quantity of loanable funds demanded. 
D) would decrease the quantity of loanable funds demanded.

Question 12

The first three elements of a financial crisis are correctly represented as taking place in the following order:

Accepted Answer

A) large decline in some asset prices → insolvencies at financial institutions → decline in confidence in financial institutions 
B) insolvencies at financial institutions → decline in confidence in financial institutions → large decline in some asset prices 
C) insolvencies at financial institutions → economic downturn → credit crunch 
D) insolvencies at financial institutions → credit crunch → economic downturn 
A) large decline in some asset prices → insolvencies at financial institutions → decline in confidence in financial institutions 
B) insolvencies at financial institutions → decline in confidence in financial institutions → large decline in some asset prices 
C) insolvencies at financial institutions → economic downturn → credit crunch 
D) insolvencies at financial institutions → credit crunch → economic downturn

Question 13

Which of the following expressions must be equal to national saving for a closed economy?

Accepted Answer

A) Y - I - G - NX 
B) Y - C - G 
C) Y - I - C 
D) G + C - Y 
A) Y - I - G - NX 
B) Y - C - G 
C) Y - I - C 
D) G + C - Y

Question 14

Which government policy raises the interest rate and raises investment spending?

Accepted Answer

An investm

Question 15

A larger budget surplus

Accepted Answer

A) raises the interest rate and investment. 
B) reduces the interest rate and investment. 
C) raises the interest rate and reduces investment. 
D) reduces the interest rate and raises investment. 
A) raises the interest rate and investment. 
B) reduces the interest rate and investment. 
C) raises the interest rate and reduces investment. 
D) reduces the interest rate and raises investment.

Question 16

Crowding out occurs when

Accepted Answer

A) investment declines because a budget deficit makes interest rates rise. 
B) investment declines because a budget deficit makes interest rates fall. 
C) investment increases because a budget surplus makes interest rates rise. 
D) investment increases because a budget surplus makes interest rates fall. 
A) investment declines because a budget deficit makes interest rates rise. 
B) investment declines because a budget deficit makes interest rates fall. 
C) investment increases because a budget surplus makes interest rates rise. 
D) investment increases because a budget surplus makes interest rates fall.

Question 17

Which of the following could explain a decrease in the interest rate and an increase in the equilibrium quantity of investment?

Accepted Answer

A) the supply of loanable funds shifted right. 
B) the supply of loanable funds shifted left. 
C) the demand for loanable funds shifted right. 
D) the demand for loanable funds shifted left. 
A) the supply of loanable funds shifted right. 
B) the supply of loanable funds shifted left. 
C) the demand for loanable funds shifted right. 
D) the demand for loanable funds shifted left.

Question 18

Scenario 26-3. Assume the following information for an imaginary, open economy.
Consumption = $1,000; investment = $200; net exports = -$50;
taxes = $230; private saving = $225; and national saving = $150.
-Refer to Scenario 26-3. For this economy, GDP equals

Accepted Answer

A) $1,480. 
B) $1,505. 
C) $1,460 
D) $1,455. 
A) $1,480. 
B) $1,505. 
C) $1,460 
D) $1,455.

Question 19

If people expect future earnings of Galt Corporation to be high relative to current earnings, then

Accepted Answer

A) the P/E ratio of its stock will be high. A P/E ratio of 8 is relatively high. 
B) the P/E ratio of its stock will be high. A P/E ratio of 8 is relatively low. 
C) the P/E ratio of its stock will be low. A P/E ratio of 8 is relatively high. 
D) the P/E ratio of its stock will be low. A P/E ratio of 8 is relatively low. 
A) the P/E ratio of its stock will be high. A P/E ratio of 8 is relatively high. 
B) the P/E ratio of its stock will be high. A P/E ratio of 8 is relatively low. 
C) the P/E ratio of its stock will be low. A P/E ratio of 8 is relatively high. 
D) the P/E ratio of its stock will be low. A P/E ratio of 8 is relatively low.

Question 20

All financial intermediaries are financial institutions, but not all financial institutions are financial intermediaries.

Accepted Answer

A) True 
 B)False

Exam 26: Saving, Investment, and the Financial System

A policy that induces people to save more shifts

The single most important piece of information about a stock is its

National saving is equal to Y - T - C.

Historically, the typical price-earnings ratio for stocks is about

​Rob wants to create a personal trainer program service and needs to pay for equipment and gym space. He can finance this capital investment by

When the government's budget deficit increases

In a closed economy, Y - C - G equals _____. The variable Y is _____, C is _____, and G is _____.

Queen City Sausage stock is selling at $40 per share, it has retained earnings of $1.00 per share, and dividends of $1.00 per share. What is the price-earnings ratio and what is the dividend yield?

In a closed economy, private saving is

According to the loanable funds model, which of the following events would result in higher interest rates and greater saving?

Other things the same, an increase in the interest rate

The first three elements of a financial crisis are correctly represented as taking place in the following order:

Which of the following expressions must be equal to national saving for a closed economy?

Which government policy raises the interest rate and raises investment spending?

A larger budget surplus

Crowding out occurs when

Which of the following could explain a decrease in the interest rate and an increase in the equilibrium quantity of investment?

Scenario 26-3. Assume the following information for an imaginary, open economy. Consumption = $1,000; investment = $200; net exports = -$50; taxes = $230; private saving = $225; and national saving = $150. -Refer to Scenario 26-3. For this economy, GDP equals

If people expect future earnings of Galt Corporation to be high relative to current earnings, then

All financial intermediaries are financial institutions, but not all financial institutions are financial intermediaries.

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

Rob wants to create a personal trainer program service and needs to pay for equipment and gym space. He can finance this capital investment by

In a closed economy, Y - C - G equals ___. The variable Y is _, C is _, and G is ___.