Question 1

A budget deficit

Accepted Answer

A) changes the supply of loanable funds. 
B) changes the demand for loanable funds. 
C) changes both the supply of and demand for loanable funds. 
D) does not influence the supply of or the demand for loanable funds. 
A) changes the supply of loanable funds. 
B) changes the demand for loanable funds. 
C) changes both the supply of and demand for loanable funds. 
D) does not influence the supply of or the demand for loanable funds.

Question 2

When the government increases its borrowing, the budget _____ increases and government debt _____. The resulting change in investment due to this increased government borrowing is called _____.

Accepted Answer

deficit, i

Question 3

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Accepted Answer

A) True 
 B)False

Question 4

The conventions of national income accounting imply that saving and investment are equal for the economy as a whole and for individual households and firms.

Accepted Answer

A) True 
 B)False

Question 5

If the government's expenditures exceeded its receipts, it would likely

Accepted Answer

A) lend money to a bank or other financial intermediary. 
B) borrow money from a bank or other financial intermediary. 
C) buy bonds directly from the public. 
D) sell bonds directly to the public. 
A) lend money to a bank or other financial intermediary. 
B) borrow money from a bank or other financial intermediary. 
C) buy bonds directly from the public. 
D) sell bonds directly to the public.

Question 6

Crowding out occurs when investment declines because a budget

Accepted Answer

A) deficit makes interest rates rise. 
B) deficit makes interest rates fall. 
C) surplus makes interest rates rise. 
D) surplus makes interest rates fall. 
A) deficit makes interest rates rise. 
B) deficit makes interest rates fall. 
C) surplus makes interest rates rise. 
D) surplus makes interest rates fall.

Question 7

National saving is the sum of _____ and _____. In a closed economy it is equal to _____ in equilibrium.

Accepted Answer

private saving, publ

Question 8

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

Accepted Answer

it has a longer term to maturi

Question 9

An increase in the budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 10

A bond buyer is a

Accepted Answer

A) saver.Bond buyers must hold their bonds until maturity. 
B) saver.Bond buyers may sell their bonds prior to maturity. 
C) borrower.Bond buyers must hold their bonds until maturity. 
D) borrower.Bond buyers may sell their bonds prior to maturity. 
A) saver.Bond buyers must hold their bonds until maturity. 
B) saver.Bond buyers may sell their bonds prior to maturity. 
C) borrower.Bond buyers must hold their bonds until maturity. 
D) borrower.Bond buyers may sell their bonds prior to maturity.

Question 11

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Accepted Answer

The supply of loanab

Question 12

Suppose the U.S. offered a tax credit for firms that built new factories in the U.S. Then the

Accepted Answer

A) demand for loanable funds would shift rightward, initially creating a surplus of loanable funds at the original interest rate. 
B) demand for loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate. 
C) supply of loanable funds would shift rightward, initially creating a surplus of loanable funds at the original interest rate. 
D) supply of loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate. 
A) demand for loanable funds would shift rightward, initially creating a surplus of loanable funds at the original interest rate. 
B) demand for loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate. 
C) supply of loanable funds would shift rightward, initially creating a surplus of loanable funds at the original interest rate. 
D) supply of loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate.

Question 13

Suppose the government changed the tax laws, with the result that people were encouraged to consume more and save less. Using the loanable funds model, a consequence would be

Accepted Answer

A) lower interest rates and lower investment. 
B) lower interest rates and greater investment. 
C) higher interest rates and lower investment. 
D) higher interest rates and higher investment. 
A) lower interest rates and lower investment. 
B) lower interest rates and greater investment. 
C) higher interest rates and lower investment. 
D) higher interest rates and higher investment.

Question 14

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 _____.

Accepted Answer

falls, inc

Question 15

Northwest Wholesale Foods sells common stock. The company is using

Accepted Answer

A) equity financing and the return shareholders earn is fixed. 
B) equity financing and the return shareholders earn depends on how profitable the company is. 
C) debt financing and the return shareholders earn is fixed. 
D) debt financing and the return shareholders earn depends on how profitable the company is. 
A) equity financing and the return shareholders earn is fixed. 
B) equity financing and the return shareholders earn depends on how profitable the company is. 
C) debt financing and the return shareholders earn is fixed. 
D) debt financing and the return shareholders earn depends on how profitable the company is.

Question 16

In a closed economy, private saving is

Accepted Answer

A) the amount of income that households have left after paying for their taxes and consumption. 
B) the amount of income that businesses have left after paying for the factors of production. 
C) the amount of tax revenue that the government has left after paying for its spending. 
D) always equal to investment. 
A) the amount of income that households have left after paying for their taxes and consumption. 
B) the amount of income that businesses have left after paying for the factors of production. 
C) the amount of tax revenue that the government has left after paying for its spending. 
D) always equal to investment.

Question 17

Congress and the President implement an investment tax credit. Which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Accepted Answer

The demand for loana

Question 18

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?

Accepted Answer

municipal,

Question 19

Consider a closed economy. In which of the following cases national saving must equal private saving?

Accepted Answer

A) Private saving is equal to government expenditures. 
B) Public saving is equal to investment. 
C) After paying their taxes and paying for their consumption, households have nothing left. 
D) The government's tax revenue is equal to its expenditures. 
A) Private saving is equal to government expenditures. 
B) Public saving is equal to investment. 
C) After paying their taxes and paying for their consumption, households have nothing left. 
D) The government's tax revenue is equal to its expenditures.

Question 20

In the terminology of macroeconomics, what's the difference between a saver and an investor?

Accepted Answer

A saver earns more than he spe

Exam 26: Saving, Investment, and the Financial System

A budget deficit

When the government increases its borrowing, the budget _____ increases and government debt _____. The resulting change in investment due to this increased government borrowing is called _____.

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

The conventions of national income accounting imply that saving and investment are equal for the economy as a whole and for individual households and firms.

If the government's expenditures exceeded its receipts, it would likely

Crowding out occurs when investment declines because a budget

National saving is the sum of _____ and _____. In a closed economy it is equal to _____ in equilibrium.

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

An increase in the budget deficit shifts the demand for loanable funds to the right.

A bond buyer is a

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Suppose the U.S. offered a tax credit for firms that built new factories in the U.S. Then the

Suppose the government changed the tax laws, with the result that people were encouraged to consume more and save less. Using the loanable funds model, a consequence would be

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 _____.

Northwest Wholesale Foods sells common stock. The company is using

In a closed economy, private saving is

Congress and the President implement an investment tax credit. Which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

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?

Consider a closed economy. In which of the following cases national saving must equal private saving?

In the terminology of macroeconomics, what's the difference between a saver and an investor?

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 the government increases its borrowing, the budget ___ increases and government debt _. The resulting change in investment due to this increased government borrowing is called ___.

National saving is the sum of ___ and _. In a closed economy it is equal to ___ in equilibrium.

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 ___.

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?