Question 1

A corporation's earnings are

Accepted Answer

A) the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants minus the dividends paid out. 
B) the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists minus the dividends paid out. 
C) the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants. 
D) the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists. 
A) the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants minus the dividends paid out. 
B) the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists minus the dividends paid out. 
C) the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants. 
D) the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists.

Question 2

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was not taxed?

Accepted Answer

A) The interest rate would decrease. 
B) Investment would decrease. 
C) The standard of living would eventually rise. 
D) The supply of loanable funds would shift right. 
A) The interest rate would decrease. 
B) Investment would decrease. 
C) The standard of living would eventually rise. 
D) The supply of loanable funds would shift right.

Question 3

Use the following table to answer the following questions.
Table 26-2
  
-Refer to Table 26-2.Which company had the lowest earnings per share?

Accepted Answer

A) Boeing Co. 
B) Eli Lilly and Co. 
C) H.J.Heinz and Co. 
D) Kellog Co. 
A) Boeing Co. 
B) Eli Lilly and Co. 
C) H.J.Heinz and Co. 
D) Kellog Co.

Question 4

Use the following table to answer the following questions.
Table 26-1
  
-Refer to Table 26-1.What was Hershey's earnings per share?

Accepted Answer

A) $38 
B) $1.64 
C) $1.31 
D) $0.61 
A) $38 
B) $1.64 
C) $1.31 
D) $0.61

Question 5

Profits not paid out to stockholders are

Accepted Answer

A) retained earnings. 
B) known as dividends. 
C) the denominator in the price-earnings ratio. 
D) All of the above are correct. 
A) retained earnings. 
B) known as dividends. 
C) the denominator in the price-earnings ratio. 
D) All of the above are correct.

Question 6

PacknCamp Corporation has a stock price of $50,has issued 2,000,000 shares of stock,has retained earnings of $4 million dollars,and a dividend yield of 4 percent.The price-earnings ratio of PacknCamp is

Accepted Answer

A) 25, which is high compared to historical standards of the market. 
B) 25, which is low compared to historical standards of the market. 
C) 12.5, which is low compared to historical standards of the market. 
D) 12.5, which is high compared to historical standards of the market. 
A) 25, which is high compared to historical standards of the market. 
B) 25, which is low compared to historical standards of the market. 
C) 12.5, which is low compared to historical standards of the market. 
D) 12.5, which is high compared to historical standards of the market.

Question 7

A closed economy does not

Accepted Answer

A) trade with other economies. 
B) have free markets. 
C) allow financial intermediation. 
D) All of the above are correct. 
A) trade with other economies. 
B) have free markets. 
C) allow financial intermediation. 
D) All of the above are correct.

Question 8

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company that they believe will make poor decisions.If things turn out as they plan

Accepted Answer

A) The price of a share of stock in the Hudsucker corporation should decline as the demand for shares falls. 
B) The price of a share of stock in the Hudsucker corporation should rise as the demand for shares rises. 
C) The price of a share of stock in the Hudsucker corporation should decline as the supply of existing shares falls. 
D) The price of a share of stock in the Hudsucker corporation should rise as the supply of existing shares rises. 
A) The price of a share of stock in the Hudsucker corporation should decline as the demand for shares falls. 
B) The price of a share of stock in the Hudsucker corporation should rise as the demand for shares rises. 
C) The price of a share of stock in the Hudsucker corporation should decline as the supply of existing shares falls. 
D) The price of a share of stock in the Hudsucker corporation should rise as the supply of existing shares rises.

Question 9

Use the following table to answer the following questions.
Table 26-2
  
-Refer to Table 26-2.Which company had the highest dollar dividend?

Accepted Answer

A) Boeing Co. 
B) Eli Lilly and Co. 
C) H.J.Heinz and Co. 
D) Kellog Co. 
A) Boeing Co. 
B) Eli Lilly and Co. 
C) H.J.Heinz and Co. 
D) Kellog Co.

Question 10

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 11

The length of time until a bond matures is called the

Accepted Answer

A) perpetuity. 
B) term. 
C) maturity. 
D) intermediation. 
A) perpetuity. 
B) term. 
C) maturity. 
D) intermediation.

Question 12

Over-the-Rhine Cheese Corporation had a PE ratio of 20,retained earnings of $1.5 per share and a dividend of $.50.What was its dividend yield?

Accepted Answer

A) 1.25% 
B) 1.67% 
C) 3.33% 
D) 7.50% 
A) 1.25% 
B) 1.67% 
C) 3.33% 
D) 7.50%

Question 13

Suppose the city of Cincinnati has a high credit rating.

Accepted Answer

A) The high credit rating and the tax status of municipal bonds should both make the interest rate lower than otherwise. 
B) The high credit rating and the tax status of municipal bonds should both make the interest rate higher than otherwise. 
C) The high credit rating should make the interest rate higher than otherwise.The tax status of municipal bonds should make the interest rate lower than otherwise. 
D) The high credit rating should make the interest rate lower than otherwise.The tax status of municipal bonds should make the interest rate higher than otherwise. 
A) The high credit rating and the tax status of municipal bonds should both make the interest rate lower than otherwise. 
B) The high credit rating and the tax status of municipal bonds should both make the interest rate higher than otherwise. 
C) The high credit rating should make the interest rate higher than otherwise.The tax status of municipal bonds should make the interest rate lower than otherwise. 
D) The high credit rating should make the interest rate lower than otherwise.The tax status of municipal bonds should make the interest rate higher than otherwise.

Question 14

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 2,500 Consumption equals 7,500 and Government purchases equal 2,000.What are private saving,public saving,and national saving?

Accepted Answer

A) 1500, 1000, 500 
B) 1000, 500, 1500 
C) 500, 1500, 1000 
D) None of the above is correct. 
A) 1500, 1000, 500 
B) 1000, 500, 1500 
C) 500, 1500, 1000 
D) None of the above is correct.

Question 15

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Accepted Answer

A) The supply of and demand for loanable funds would shift right. 
B) The supply of and demand for loanable funds would shift left. 
C) The supply of loanable funds would shift right and the demand for loanable funds would shift left. 
D) None of the above is correct. 
A) The supply of and demand for loanable funds would shift right. 
B) The supply of and demand for loanable funds would shift left. 
C) The supply of loanable funds would shift right and the demand for loanable funds would shift left. 
D) None of the above is correct.

Question 16

Suppose Sarah Lee Corporation stock has a P/E ratio of 8.This P/E ratio is relatively

Accepted Answer

A) low, indicating that buyers may expect earnings to rise. 
B) low, indicating that buyers may expect earnings to fall. 
C) high, indicating that buyers may expect earnings to rise. 
D) high, indicating that buyers may expect earnings to fall. 
A) low, indicating that buyers may expect earnings to rise. 
B) low, indicating that buyers may expect earnings to fall. 
C) high, indicating that buyers may expect earnings to rise. 
D) high, indicating that buyers may expect earnings to fall.

Question 17

If Congress instituted an investment tax credit,the demand for loanable funds would shift right.

Accepted Answer

A) True 
 B)False

Question 18

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Accepted Answer

A) there is a surplus and the interest rate is above the equilibrium level. 
B) there is a surplus and the interest rate is below the equilibrium level. 
C) there is a shortage and the interest rate is above the equilibrium level. 
D) there is a shortage and the interest rate is below the equilibrium level. 
A) there is a surplus and the interest rate is above the equilibrium level. 
B) there is a surplus and the interest rate is below the equilibrium level. 
C) there is a shortage and the interest rate is above the equilibrium level. 
D) there is a shortage and the interest rate is below the equilibrium level.

Question 19

A budget surplus is created if

Accepted Answer

A) the government sells more bonds than it buys back. 
B) the government spends more than it receives in tax revenue. 
C) private saving is greater than zero. 
D) None of the above is correct. 
A) the government sells more bonds than it buys back. 
B) the government spends more than it receives in tax revenue. 
C) private saving is greater than zero. 
D) None of the above is correct.

Question 20

National saving is equal to Y - T - C.

Accepted Answer

A) True 
 B)False

Exam 26: Saving, investment, and the Financial System

A corporation's earnings are

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was not taxed?

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2.Which company had the lowest earnings per share?

Use the following table to answer the following questions. Table 26-1 -Refer to Table 26-1.What was Hershey's earnings per share?

Profits not paid out to stockholders are

PacknCamp Corporation has a stock price of $50,has issued 2,000,000 shares of stock,has retained earnings of $4 million dollars,and a dividend yield of 4 percent.The price-earnings ratio of PacknCamp is

A closed economy does not

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company that they believe will make poor decisions.If things turn out as they plan

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2.Which company had the highest dollar dividend?

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

The length of time until a bond matures is called the

Over-the-Rhine Cheese Corporation had a PE ratio of 20,retained earnings of $1.5 per share and a dividend of $.50.What was its dividend yield?

Suppose the city of Cincinnati has a high credit rating.

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 2,500 Consumption equals 7,500 and Government purchases equal 2,000.What are private saving,public saving,and national saving?

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Suppose Sarah Lee Corporation stock has a P/E ratio of 8.This P/E ratio is relatively

If Congress instituted an investment tax credit,the demand for loanable funds would shift right.

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

A budget surplus is created if

National saving is equal to Y - T - C.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: 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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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