Question 1

In a closed economy, if Y, C, and T remained the same, a decrease in G would

Accepted Answer

A) reduce private saving and public saving. 
B) increase private saving but not public saving. 
C) increase public saving but not private saving. 
D) increase neither private nor public saving. 
A) reduce private saving and public saving. 
B) increase private saving but not public saving. 
C) increase public saving but not private saving. 
D) increase neither private nor public saving.

Question 2

A decrease in taxes on interest income would increase the interest rate.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

The answer of When tax code changes reduce saving incentives,...

Question 4

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories are sold. What type of risk for bondholders falls? What happens to the interest rate on this company's bonds?

Accepted Answer

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Question 5

The income that households have left after paying their taxes and paying for their consumption is known as _____.

Accepted Answer

The answer of The income that households have left after...

Question 6

To state that national saving is equal to investment, for a closed economy, is to state an accounting identity.

Accepted Answer

A) True 
 B)False

Question 7

How do banks make profits?

Accepted Answer

They charge borrower

Question 8

Suppose the Move It! exercise chain has revenues of $45 million, accounting costs of $15 million, and currently has issued 10 million shares of stocks selling at $90 each. Compute the price-earning ratio. Show your work. Is this ratio relatively high or low? What might an increase in the price-earnings ratio indicate?

Accepted Answer

The earnings per share is ($45 million -

Question 9

Financial crises seldom involve economic downturns.

Accepted Answer

A) True 
 B)False

Question 10

Figure 26-2
The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves.  
-Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Accepted Answer

A) The government goes from running a budget deficit to running a budget surplus. 
B) Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories. 
C) A change in the tax laws encourages people to consume less and save more. 
D) A change in the tax laws encourages people to consume more and save less. 
A) The government goes from running a budget deficit to running a budget surplus. 
B) Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories. 
C) A change in the tax laws encourages people to consume less and save more. 
D) A change in the tax laws encourages people to consume more and save less.

Question 11

In a closed economy, what does the difference between the tax revenue and government purchases, (T − G), represent?

Accepted Answer

A) National saving 
B) Investment 
C) Private saving 
D) Public saving 
A) National saving 
B) Investment 
C) Private saving 
D) Public saving

Question 12

A higher interest rate makes _____ less attractive. Therefore the quantity of loanable funds demanded decreases.

Accepted Answer

The answer of A higher interest rate makes _____ less...

Question 13

A restaurant chain announces declining revenues. What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

Accepted Answer

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Question 14

Generally, if people begin to expect a company to have higher future profits, the price of the company's stock will begin to decrease.

Accepted Answer

A) True 
 B)False

Question 15

What does the maturity of a bond indicate?

Accepted Answer

The date a

Question 16

When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling shares of stock.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A bond buyer is a

Accepted Answer

A) saver.Long-term bonds have less risk than short-term bonds. 
B) saver.Long-term bonds have more risk than short-term bonds. 
C) borrower.Long-term bonds have less risk than short-term bonds. 
D) borrower.Long-term bonds have more risk than short-term bonds. 
A) saver.Long-term bonds have less risk than short-term bonds. 
B) saver.Long-term bonds have more risk than short-term bonds. 
C) borrower.Long-term bonds have less risk than short-term bonds. 
D) borrower.Long-term bonds have more risk than short-term bonds.

Question 19

Two of the economy's most important financial intermediaries are

Accepted Answer

A) suppliers of funds and demanders of funds. 
B) banks and the bond market. 
C) the stock market and the bond market. 
D) banks and mutual funds. 
A) suppliers of funds and demanders of funds. 
B) banks and the bond market. 
C) the stock market and the bond market. 
D) banks and mutual funds.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 26: Saving, Investment, and the Financial System

In a closed economy, if Y, C, and T remained the same, a decrease in G would

A decrease in taxes on interest income would increase the interest rate.

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

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories are sold. What type of risk for bondholders falls? What happens to the interest rate on this company's bonds?

The income that households have left after paying their taxes and paying for their consumption is known as _____.

To state that national saving is equal to investment, for a closed economy, is to state an accounting identity.

How do banks make profits?

Financial crises seldom involve economic downturns.

Figure 26-2 The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. -Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

In a closed economy, what does the difference between the tax revenue and government purchases, (T − G), represent?

A higher interest rate makes _____ less attractive. Therefore the quantity of loanable funds demanded decreases.

A restaurant chain announces declining revenues. What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

Generally, if people begin to expect a company to have higher future profits, the price of the company's stock will begin to decrease.

What does the maturity of a bond indicate?

When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling shares of stock.

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

A bond buyer is a

Two of the economy's most important financial intermediaries are

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

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

When tax code changes reduce saving incentives, the interest rate will _ and investment will _.

Figure 26-2 The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. -Refer to Figure 26-2. Which of the following events would shift the demand curve from D₁ to D₂?