Exam 26: Saving, Investment, and the Financial System

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 _____.

If consumers reduced their spending, what would happen to the interest rate and investment?

Which of the following counts as part of the supply of loanable funds?

If a firm's price-earnings ratio is relatively low, then it might be an indication that

If Huedepool Beer runs into financial difficulty, the stockholders as

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. For this economy, consumption amounts to

Figure 26-5. Figure 26-5 shows the loanable funds market for a closed economy. -Refer to Figure 26-5. Starting at point A, a reduction in government spending would cause

Suppose a country has a consumption tax that is similar to a state sales tax. If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings, what would happen?

The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. The increase in the rate of interest should

The term loanable funds refers to all income that is not used for consumption or government expenditures.

List three characteristics of a bond that would make its interest rate higher than otherwise.

A higher interest rate makes _____ more attractive. Therefore the quantity of loanable funds supplied increases.

In a closed economy taxes are $750 billion, government transfers are $400 billion, government expenditures are $500 billion, and investment is $400 billion. What are private saving, public saving and national saving?

When tax code changes increase saving incentives, the interest rate will _____ and investment will _____.

An increase in the budget deficit would cause a

Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 26-4. The position and/or slope of the Supply curve are influenced by

Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds?

If the budget deficit increases then

The term crowding out refers to decreases in the interest rate caused by government budget surpluses.

In a closed economy private saving is $500 billion and the government budget deficit is $100 billion. What is investment?