Question 1

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

Accepted Answer

A) True 
 B)False

Question 2

If the demand for loanable funds shifts right,the equilibrium interest rate

Accepted Answer

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

Question 3

Y = C + I + G + NX is an identity because

Accepted Answer

A) each symbol identifies a variable. 
B) the right-hand and left-hand sides are equal. 
C) the equality holds due to the way the variables are defined. 
D) None of the above is correct. 
A) each symbol identifies a variable. 
B) the right-hand and left-hand sides are equal. 
C) the equality holds due to the way the variables are defined. 
D) None of the above is correct.

Question 4

Tom buys a bond issued by Budweiser,which uses the funds to buy new machinery for one of its breweries.

Accepted Answer

A) Tom and Budweiser are both investing. 
B) Tom and Budweiser are both saving. 
C) Tom is investing; Budweiser is saving. 
D) Tom is saving; Budweiser is investing. 
A) Tom and Budweiser are both investing. 
B) Tom and Budweiser are both saving. 
C) Tom is investing; Budweiser is saving. 
D) Tom is saving; Budweiser is investing.

Question 5

If the tax revenue of the federal government exceeds spending,then the government necessarily

Accepted Answer

A) runs a budget deficit. 
B) runs a budget surplus. 
C) runs a national debt. 
D) will increase taxes. 
A) runs a budget deficit. 
B) runs a budget surplus. 
C) runs a national debt. 
D) will increase taxes.

Question 6

Your brother-in-law wants to buy either stock or bonds in Cedar Valley Furniture who manufactures wooden furniture.He wants your advice on whether to buy stock or bonds.Explain how each of his quotes below should affect his choice between the stock and the bond.
a."I have reason to believe that people are soon going to find rocking chairs have health benefits."
b."I would like to tell people I am part owner of Cedar Valley Furniture."
c."I do not want to take on much risk."

Accepted Answer

a. Presumably,when this happens,unless e

Question 7

Which of the following would both shift the supply of loanable funds right?

Accepted Answer

A) tax reforms encourage greater saving and the budget deficit falls 
B) tax reforms encourage greater saving and investment tax credits are increased 
C) the budget deficit rises and investment tax credits are increased 
D) the budget deficit rises and tax reform discourages saving 
A) tax reforms encourage greater saving and the budget deficit falls 
B) tax reforms encourage greater saving and investment tax credits are increased 
C) the budget deficit rises and investment tax credits are increased 
D) the budget deficit rises and tax reform discourages saving

Question 8

In the language of macroeconomics,investment refers to

Accepted Answer

A) saving. 
B) the purchase of new capital. 
C) the purchase of stocks, bonds, or mutual funds. 
D) All of the above are correct. 
A) saving. 
B) the purchase of new capital. 
C) the purchase of stocks, bonds, or mutual funds. 
D) All of the above are correct.

Question 9

Lacey,a financial advisor has told her clients the following things.Which of her statements is not correct?

Accepted Answer

A) "U.S.government bonds generally have a higher rate of interest than municipal bonds." 
B) "The interest received on corporate bonds is taxable." 
C) "U.S.government bonds have the lowest default risk." 
D) "If you purchase a bond, you must hold it until it matures." 
A) "U.S.government bonds generally have a higher rate of interest than municipal bonds." 
B) "The interest received on corporate bonds is taxable." 
C) "U.S.government bonds have the lowest default risk." 
D) "If you purchase a bond, you must hold it until it matures."

Question 10

People who buy stock in a corporation such as General Electric become

Accepted Answer

A) creditors of General Electric, so the benefits of holding the stock depend on General Electric's profits. 
B) creditors of General Electric, but the benefits of holding the stock do not depend on General Electric's profits. 
C) part owners of General Electric, so the benefits of holding the stock depend on General Electric's profits. 
D) part owners of General Electric, but the benefits of holding the stock do not depend on General Electric's profits. 
A) creditors of General Electric, so the benefits of holding the stock depend on General Electric's profits. 
B) creditors of General Electric, but the benefits of holding the stock do not depend on General Electric's profits. 
C) part owners of General Electric, so the benefits of holding the stock depend on General Electric's profits. 
D) part owners of General Electric, but the benefits of holding the stock do not depend on General Electric's profits.

Question 11

Volume,as reported in stock tables refers to the

Accepted Answer

A) number of shares traded. 
B) percentage of shares outstanding traded. 
C) number of shares traded times the price they sold at. 
D) number of shares of a company traded divided by the shares of all companies traded. 
A) number of shares traded. 
B) percentage of shares outstanding traded. 
C) number of shares traded times the price they sold at. 
D) number of shares of a company traded divided by the shares of all companies traded.

Question 12

Suppose a small closed economy has GDP of $5 billion,Consumption of $3 billion,and Government expenditures of $1 billion.Then domestic investment and national saving are both $1 billion.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following people purchased the correct asset to meet their objective?

Accepted Answer

A) Michelle wanted to be a part owner of Mamma Rosa's Pizza, so she purchased a bond issued by Mamma Rosa's Pizza. 
B) Tim wanted a high return, even if it meant taking some risk, so he purchased stock issued by Specific Electric instead of bonds issued by Specific Electric. 
C) Jennifer wanted to buy equity in Honda, so she purchased bonds sold by Honda. 
D) All of the above are correct. 
A) Michelle wanted to be a part owner of Mamma Rosa's Pizza, so she purchased a bond issued by Mamma Rosa's Pizza. 
B) Tim wanted a high return, even if it meant taking some risk, so he purchased stock issued by Specific Electric instead of bonds issued by Specific Electric. 
C) Jennifer wanted to buy equity in Honda, so she purchased bonds sold by Honda. 
D) All of the above are correct.

Question 14

A low P/E for a stock indicates that

Accepted Answer

A) people may expect earnings to fall in the future, perhaps because the firm will be faced with increased competition. 
B) its dividends have been low so that no one is willing to pay very much for it. 
C) the corporation is possibly overvalued. 
D) All of the above are correct. 
A) people may expect earnings to fall in the future, perhaps because the firm will be faced with increased competition. 
B) its dividends have been low so that no one is willing to pay very much for it. 
C) the corporation is possibly overvalued. 
D) All of the above are correct.

Question 15

Index funds

Accepted Answer

A) typically have a higher rate of return and higher costs than managed mutual funds. 
B) typically have a higher rate of return and lower costs than managed mutual funds. 
C) typically have a lower rate of return and higher costs than managed mutual funds. 
D) typically have a lower rate of return and lower costs than managed mutual funds. 
A) typically have a higher rate of return and higher costs than managed mutual funds. 
B) typically have a higher rate of return and lower costs than managed mutual funds. 
C) typically have a lower rate of return and higher costs than managed mutual funds. 
D) typically have a lower rate of return and lower costs than managed mutual funds.

Question 16

Use the following table to answer the following questions.
Table 26-1
  
-Refer to Table 26-1.In dollar terms,which company paid the highest dividend per share?

Accepted Answer

A) GenMills 
B) Gillette 
C) Graco 
D) Hershey 
A) GenMills 
B) Gillette 
C) Graco 
D) Hershey

Question 17

In a closed economy,what does (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 18

The single most important piece of information about a stock is the

Accepted Answer

A) amount of earnings the firm retains. 
B) dividend. 
C) volume 
D) price. 
A) amount of earnings the firm retains. 
B) dividend. 
C) volume 
D) price.

Question 19

Other things the same,which bond would you expect to pay the highest interest rate?

Accepted Answer

A) a bond issued by the U.S.government 
B) a bond issued by IBM 
C) a bond issued by New York State 
D) a bond issued by a new restaurant chain 
A) a bond issued by the U.S.government 
B) a bond issued by IBM 
C) a bond issued by New York State 
D) a bond issued by a new restaurant chain

Question 20

In a closed economy,public saving is the

Accepted Answer

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

Exam 26: Saving, investment, and the Financial System

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

If the demand for loanable funds shifts right,the equilibrium interest rate

Y = C + I + G + NX is an identity because

Tom buys a bond issued by Budweiser,which uses the funds to buy new machinery for one of its breweries.

If the tax revenue of the federal government exceeds spending,then the government necessarily

Which of the following would both shift the supply of loanable funds right?

In the language of macroeconomics,investment refers to

Lacey,a financial advisor has told her clients the following things.Which of her statements is not correct?

People who buy stock in a corporation such as General Electric become

Volume,as reported in stock tables refers to the

Suppose a small closed economy has GDP of $5 billion,Consumption of $3 billion,and Government expenditures of $1 billion.Then domestic investment and national saving are both $1 billion.

Which of the following people purchased the correct asset to meet their objective?

A low P/E for a stock indicates that

Index funds

Use the following table to answer the following questions. Table 26-1 -Refer to Table 26-1.In dollar terms,which company paid the highest dividend per share?

In a closed economy,what does (T - G)represent?

The single most important piece of information about a stock is the

Other things the same,which bond would you expect to pay the highest interest rate?

In a closed economy,public saving is the

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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