Exam 26: Saving, Investment, and the Financial System

The two most important financial markets are the _____ market and the _____ market.

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, private saving amounts to

Who accepts all of the risk associated with a mutual fund's portfolio of stocks and/or bonds?

Suppose that Congress were to institute an investment tax credit. What would happen in the market for loanable funds?

​A tech company loses a high-profile patent-infringement case against its top competitor. Which of the following is true?

If Congress instituted an investment tax credit, the interest rate would

The slope of the demand for loanable funds curve represents the

Kroger's grocery chain wants to finance the purchase of a new warehouse. It decides to sell bonds.

The model of the market for loanable funds shows that an investment tax credit will cause interest rates to rise and investment to rise. Yet we also suppose that higher interest rates lead to lower investment. How can these two conclusions be reconciled?

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. Regard the position of the Supply curve as fixed, as on the graph. If the real interest rate is 4 percent, the inflation rate is 2 percent, and the market for loanable funds is in equilibrium, then the position of the demand-for-loanable-funds curve must be

Suppose government expenditures on goods and services and net taxes both decrease, and expenditures fall by more than net taxes. The effects of these changes on the budget deficit cause

The Dow Jones Industrial Average has been computed regularly since

A change in the tax laws that increases the supply of loanable funds will have a smaller effect on investment when

Managed mutual funds perform better on average than index funds because stock prices are usually a good predictor of a company's true value.

What is a bond buyer promised when she buys a bond?

If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.

If the government reduces transfer payments, what happens to the budget deficit? What curve does this change in the market for loanable funds, which direction does it shift, and what happens to the equilibrium interest rate?

In a closed economy, if Y is 10,000, T is 1,000, G is 3,000, and C is 5,000, then

​Woody wants to open a pet store and needs to buy a building. Both the nominal interest rate and the inflation rate increase by 2 percent. Now, Woody

In 2009, the U.S. government's budget deficit increased substantially. Other things the same, this means the