Question 1

Lenders sell bonds and borrowers buy them.

Accepted Answer

A) True 
 B)False

Question 2

Banks and mutual funds are examples of financial markets.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is true concerning interest rates on bonds?

Accepted Answer

A) Because of the tax advantage, municipal bonds pay higher interest rate than other bonds.High default risk makes the interest rate on a bond higher than otherwise. 
B) Because of the tax advantage, municipal bonds pay higher interest rate than other bonds.High default risk makes the interest rate on a bond lower than otherwise. 
C) Because of the tax advantage, municipal bonds pay lower interest rate than other bonds.High default risk makes the interest rate on a bond higher than otherwise. 
D) Because of the tax advantage, municipal bonds pay lower interest rate than other bonds.High default risk makes the interest rate on a bond lower than otherwise. 
A) Because of the tax advantage, municipal bonds pay higher interest rate than other bonds.High default risk makes the interest rate on a bond higher than otherwise. 
B) Because of the tax advantage, municipal bonds pay higher interest rate than other bonds.High default risk makes the interest rate on a bond lower than otherwise. 
C) Because of the tax advantage, municipal bonds pay lower interest rate than other bonds.High default risk makes the interest rate on a bond higher than otherwise. 
D) Because of the tax advantage, municipal bonds pay lower interest rate than other bonds.High default risk makes the interest rate on a bond lower than otherwise.

Question 4

Figure 26-3
The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.
​  
-Refer to Figure 26-3. A shift of the supply curve from S1 to S2 is called

Accepted Answer

A) an increase in the supply of loanable funds. 
B) an increase in the quantity of loanable funds supplied. 
C) a decrease in the supply of loanable funds. 
D) a decrease in the quantity of loanable funds supplied. 
A) an increase in the supply of loanable funds. 
B) an increase in the quantity of loanable funds supplied. 
C) a decrease in the supply of loanable funds. 
D) a decrease in the quantity of loanable funds supplied.

Question 5

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Accepted Answer

A) Saving and the interest rate 
B) Saving but not the interest rate 
C) The interest rate but not saving 
D) Neither saving nor the interest rate 
A) Saving and the interest rate 
B) Saving but not the interest rate 
C) The interest rate but not saving 
D) Neither saving nor the interest rate

Question 6

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Accepted Answer

A) True 
 B)False

Question 7

Public saving is equal to national saving minus private saving.

Accepted Answer

A) True 
 B)False

Question 8

If the demand for loanable funds shifts to the left, then the equilibrium interest rate

Accepted Answer

A) and quantity of loanable funds rises. 
B) rises and the quantity of loanable funds falls. 
C) falls and the quantity of loanable funds rises. 
D) and quantity of loanable funds falls. 
A) and quantity of loanable funds rises. 
B) rises and the quantity of loanable funds falls. 
C) falls and the quantity of loanable funds rises. 
D) and quantity of loanable funds falls.

Question 9

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

Accepted Answer

The answer of What is a bond buyer promised when...

Question 10

The old adage, "Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Accepted Answer

A) "Buy low-risk bonds." 
B) "Use a medium of exchange." 
C) "Diversify." 
D) "Intermediate." 
A) "Buy low-risk bonds." 
B) "Use a medium of exchange." 
C) "Diversify." 
D) "Intermediate."

Question 11

Public saving is the difference between _____ and _____.

Accepted Answer

tax revenue, governm

Question 12

Public saving is T - G, while private saving is Y - T - C.

Accepted Answer

A) True 
 B)False

Question 13

National saving is equal to Y - T - C.

Accepted Answer

A) True 
 B)False

Question 14

Table 26-1. The following table presents information about a closed economy whose market for loanable funds is in equilibrium.
​
​
 $$\begin{array} { | l | l | } 
\hline \text { GDP } & \$ 8.3 \text { trillion } \
\hline \text { Consumer Spending } & \$ 5.1 \text { trillion } \
\hline \text { Taxes Minus Transfers } & \$ 1.9 \text { trillion } \
\hline \text { Government Purchases } & \$ 0.5 \text { trillion } \
\hline
\end{array}$$ ​
-Refer to Table 26-1. The quantity of private saving is

Accepted Answer

A) $3.2 trillion. 
B) $1.3 trillion. 
C) $2.7 trillion. 
D) $6.4 trillion. 
A) $3.2 trillion. 
B) $1.3 trillion. 
C) $2.7 trillion. 
D) $6.4 trillion.

Question 15

The slope of the supply of loanable funds curve represents the

Accepted Answer

A) positive relation between the interest rate and investment. 
B) positive relation between the interest rate and saving. 
C) negative relation between the interest rate and investment. 
D) negative relation between the interest rate and saving. 
A) positive relation between the interest rate and investment. 
B) positive relation between the interest rate and saving. 
C) negative relation between the interest rate and investment. 
D) negative relation between the interest rate and saving.

Question 16

If the nominal interest rate is 8 percent and the inflation rate is 3 percent, then the real interest rate is

Accepted Answer

A) -5 percent. 
B) 11 percent. 
C) 5 percent. 
D) 3 percent. 
A) -5 percent. 
B) 11 percent. 
C) 5 percent. 
D) 3 percent.

Question 17

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

Accepted Answer

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

Question 18

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.

Accepted Answer

A) True 
 B)False

Question 19

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

Accepted Answer

the intere

Question 20

_____ and _____ are the two most important financial intermediaries.

Accepted Answer

Banks, Mut

Exam 26: Saving, Investment, and the Financial System

Lenders sell bonds and borrowers buy them.

Banks and mutual funds are examples of financial markets.

Which of the following is true concerning interest rates on bonds?

Figure 26-3 The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. ​ -Refer to Figure 26-3. A shift of the supply curve from S1 to S2 is called

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Public saving is equal to national saving minus private saving.

If the demand for loanable funds shifts to the left, then the equilibrium interest rate

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

The old adage, "Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Public saving is the difference between _____ and _____.

Public saving is T - G, while private saving is Y - T - C.

National saving is equal to Y - T - C.

The slope of the supply of loanable funds curve represents the

If the nominal interest rate is 8 percent and the inflation rate is 3 percent, then the real interest rate is

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

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.

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

_____ and _____ are the two most important 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 Nations 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

Figure 26-3 The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. A shift of the supply curve from S₁ to S₂ is called

Public saving is the difference between _ and _.

_ and _ are the two most important financial intermediaries.