Question 1

Mount Adams Jazz Corporation has a price of $100,a dividend of $0.80,and retained earnings of $2.00 per share.The dividend yield on this stock is

Accepted Answer

A) 2.8 percent. 
B) 2 percent. 
C) 1.2 percent. 
D) .8 percent. 
A) 2.8 percent. 
B) 2 percent. 
C) 1.2 percent. 
D) .8 percent.

Question 2

Compared to long-term bonds,other things the same,short-term bonds generally have

Accepted Answer

A) more risk and so pay higher interest. 
B) less risk and so pay lower interest. 
C) less risk and so pay higher interest. 
D) about the same risk and so pay about the same interest. 
A) more risk and so pay higher interest. 
B) less risk and so pay lower interest. 
C) less risk and so pay higher interest. 
D) about the same risk and so pay about the same interest.

Question 3

Which of the following is correct?

Accepted Answer

A) Some bonds have terms as short as a few months. 
B) Because they are so risky, junk bonds pay a low rate of interest. 
C) Corporations buy bonds to raise funds. 
D) All of the above are correct. 
A) Some bonds have terms as short as a few months. 
B) Because they are so risky, junk bonds pay a low rate of interest. 
C) Corporations buy bonds to raise funds. 
D) All of the above are correct.

Question 4

Other things the same,a higher interest rate induces people to

Accepted Answer

A) save more, so the supply of loanable funds slopes upward. 
B) save less, so the supply of loanable funds slopes downward. 
C) invest more, so the supply of loanable funds slopes upward. 
D) invest less, so the supply of loanable funds slopes downward. 
A) save more, so the supply of loanable funds slopes upward. 
B) save less, so the supply of loanable funds slopes downward. 
C) invest more, so the supply of loanable funds slopes upward. 
D) invest less, so the supply of loanable funds slopes downward.

Question 5

The sale of stocks or bonds to raise money is known as equity finance.

Accepted Answer

A) True 
 B)False

Question 6

Most entrepreneurs finance their purchases of real capital using their past saving.

Accepted Answer

A) True 
 B)False

Question 7

Historically,the typical price-earnings ratio is about

Accepted Answer

A) 3 
B) 8 
C) 15 
D) 26 
A) 3 
B) 8 
C) 15 
D) 26

Question 8

The country of Nemedia does not trade with any other country.Its GDP is $30 billion.Its government purchases $5 billion worth of goods and services each year,collects $7 billion in taxes,and provides $3 billion in transfer payments to households.Private saving in Nemedia is $5 billion.What is consumption and investment in Nemedia?

Accepted Answer

A) $18 billion and $5 billion 
B) $21 billion and $4 billion 
C) $13 billion and $7 billion 
D) There is not enough information to answer the question. 
A) $18 billion and $5 billion 
B) $21 billion and $4 billion 
C) $13 billion and $7 billion 
D) There is not enough information to answer the question.

Question 9

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

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 10

Other things the same,when the interest rate rises

Accepted Answer

A) people would want to lend more, making the supply of loanable funds increase. 
B) people would want to lend less, making the supply of loanable funds decrease. 
C) people would want to lend more, making the quantity of loanable funds supplied increase. 
D) people would want to lend less, making the quantity of loanable funds supplied decrease. 
A) people would want to lend more, making the supply of loanable funds increase. 
B) people would want to lend less, making the supply of loanable funds decrease. 
C) people would want to lend more, making the quantity of loanable funds supplied increase. 
D) people would want to lend less, making the quantity of loanable funds supplied decrease.

Question 11

A high price-earnings ratio indicates that either the stock is

Accepted Answer

A) undervalued or people are relatively optimistic about the corporation's prospects. 
B) overvalued or people are relatively optimistic about the corporation's prospects. 
C) overvalued or people are relatively pessimistic about the corporation's prospects. 
D) undervalued or people are relatively pessimistic about the corporation's prospects. 
A) undervalued or people are relatively optimistic about the corporation's prospects. 
B) overvalued or people are relatively optimistic about the corporation's prospects. 
C) overvalued or people are relatively pessimistic about the corporation's prospects. 
D) undervalued or people are relatively pessimistic about the corporation's prospects.

Question 12

Alberta buys a paint sprayer and a lift for her car customizing shop.A macroeconomist would refer to these purchases as investment.

Accepted Answer

A) True 
 B)False

Question 13

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 to earning ratio.Show your work.Is this ratio relatively high or low? What might an increase in the price to earning ratio indicate?

Accepted Answer

The earnings per share is ($45 million -

Question 14

Which of the following statements is correct?

Accepted Answer

A) A general, persistent decline in stock prices may signal that the economy is about to enter a boom period because people will be able to buy stock for less money. 
B) A general, persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices may mean that people are expecting low corporate profits. 
C) A general, persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices mean that corporations have had low profits in the past. 
D) Expectations about the business cycle have no impact on stock prices. 
A) A general, persistent decline in stock prices may signal that the economy is about to enter a boom period because people will be able to buy stock for less money. 
B) A general, persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices may mean that people are expecting low corporate profits. 
C) A general, persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices mean that corporations have had low profits in the past. 
D) Expectations about the business cycle have no impact on stock prices.

Question 15

Crowding out occurs when investment declines because

Accepted Answer

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

Question 16

Suppose the market for loanable funds is in equilibrium.Given the numbers below,determine the quantity of funds demanded.

Accepted Answer

A) $25 billion 
B) $20 billion 
C) $15 billion 
D) $10 billion 
A) $25 billion 
B) $20 billion 
C) $15 billion 
D) $10 billion

Question 17

Buskin's Corporation has issued 2 million shares of stocks.Its earnings were $10 million dollars of which it retained $6 million.What was the dividend per share?

Accepted Answer

A) $2. 
B) $3. 
C) $5 
D) None of the above is correct. 
A) $2. 
B) $3. 
C) $5 
D) None of the above is correct.

Question 18

In the national income accounting identity showing the equality between national saving and investment,what is the representation of private saving and what is the representation of public saving?

Accepted Answer

Private saving is Y

Question 19

The slope of the supply of loanable funds curve represents the

Accepted Answer

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

Question 20

When a corporation experiences financial problems,bondholders are paid before stockholders.

Accepted Answer

A) True 
 B)False

Exam 26: Saving, investment, and the Financial System

Mount Adams Jazz Corporation has a price of $100,a dividend of $0.80,and retained earnings of $2.00 per share.The dividend yield on this stock is

Compared to long-term bonds,other things the same,short-term bonds generally have

Which of the following is correct?

Other things the same,a higher interest rate induces people to

The sale of stocks or bonds to raise money is known as equity finance.

Most entrepreneurs finance their purchases of real capital using their past saving.

Historically,the typical price-earnings ratio is about

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

Other things the same,when the interest rate rises

A high price-earnings ratio indicates that either the stock is

Alberta buys a paint sprayer and a lift for her car customizing shop.A macroeconomist would refer to these purchases as investment.

Which of the following statements is correct?

Crowding out occurs when investment declines because

Suppose the market for loanable funds is in equilibrium.Given the numbers below,determine the quantity of funds demanded.

Buskin's Corporation has issued 2 million shares of stocks.Its earnings were $10 million dollars of which it retained $6 million.What was the dividend per share?

In the national income accounting identity showing the equality between national saving and investment,what is the representation of private saving and what is the representation of public saving?

The slope of the supply of loanable funds curve represents the

When a corporation experiences financial problems,bondholders are paid before stockholders.

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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