Exam 26: Saving, Investment, and the Financial System

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland,

For an open economy, the equation Y = C + I + G + NX is an identity. If we define national saving, S, as the total income in the economy that is left after paying for consumption and government purchases, then for an open economy, it is true that

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

According to the definitions of national saving and public saving, if Y, C, and G remained the same, an increase in taxes would

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders. This failure is referred to as a

Bonds issued by state and local governments are called _____ bonds. Bonds issued by financially shaky corporations are called _____ bonds. Of these two, which type of bond usually pays a relatively higher interest rate?

A high price-earnings ratio for a stock indicates that either the stock is

The country of Meditor, a small country with a closed economy, uses the merit as its currency. Recent national income statistics showed that it had GDP of $600 million merits, no government transfer payments, taxes of $150 million merits, a budget surplus of $40 billion merits, and investment of $100 billion merits. What were its consumption and government expenditures on goods and services?

When an economy's government goes from running a budget deficit to running a budget surplus, the economy's long-run growth prospects are improved.

The source of the supply of loanable funds is

Suppose the government ran a budget surplus in 2010 and a larger surplus in 2011. The loanable funds model would predict that, as a result of the increase in the surplus,

Bountiful Tractors has a share price of $60, retained earnings of $2 per share, and a dividend yield of 2 percent. What is Bountiful Tractor's price-earnings ratio?

Suppose a small closed economy has GDP of $5 billion, consumption of $3 billion, and government expenditures of $1 billion. Then investment and national saving are both $1 billion.

Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a

Borrowers can (and sometimes do) default on their loans when

If people become less optimistic about the future earnings of Hyde Park Jazz Studio, then the price of the company's stock will fall.

Crowding out occurs when investment declines because

Stock represents

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

The ratio of debt to GDP in the United States