Question 1

A bond is a

Accepted Answer

A) financial intermediary. 
B) certificate of indebtedness. 
C) certificate of partial ownership in an enterprise. 
D) None of the above is correct. 
A) financial intermediary. 
B) certificate of indebtedness. 
C) certificate of partial ownership in an enterprise. 
D) None of the above is correct.

Question 2

Which of the following equations represents national saving in a closed economy?

Accepted Answer

A) Y - I - G - NX 
B) Y - C - G 
C) Y - I - C 
D) G + C - Y 
A) Y - I - G - NX 
B) Y - C - G 
C) Y - I - C 
D) G + C - Y

Question 3

In the first part of this decade the U.S.government went from a surplus to a deficit.Other things the same,this means the

Accepted Answer

A) supply of loanable funds shifted right. 
B) supply of loanable funds shifted left. 
C) demand for loanable funds shifted right. 
D) demand for loanable funds shifted left. 
A) supply of loanable funds shifted right. 
B) supply of loanable funds shifted left. 
C) demand for loanable funds shifted right. 
D) demand for loanable funds shifted left.

Question 4

The slope of the demand for loanable funds curve represents the

Accepted Answer

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

Question 5

Other things the same,bonds are likely to have higher interest rates if they have

Accepted Answer

A) tax exemptions and short terms. 
B) tax exemptions and long terms. 
C) no tax exemptions and short terms. 
D) no tax exemptions and long terms. 
A) tax exemptions and short terms. 
B) tax exemptions and long terms. 
C) no tax exemptions and short terms. 
D) no tax exemptions and long terms.

Question 6

Suppose a country had a smaller increase in debt in 2006 than it had in 2005.Then other things the same,we'd expect

Accepted Answer

A) lower interest rates and investment in 2006 than in 2005. 
B) lower interest rates and greater investment in 2006 than in 2005. 
C) higher interest rates and greater investment in 2006 than in 2005. 
D) higher interest rates and lower investment in 2006 than in 2005. 
A) lower interest rates and investment in 2006 than in 2005. 
B) lower interest rates and greater investment in 2006 than in 2005. 
C) higher interest rates and greater investment in 2006 than in 2005. 
D) higher interest rates and lower investment in 2006 than in 2005.

Question 7

The Dow Jones Industrial Average is now based on the prices of the stocks of

Accepted Answer

A) 30 major U.S.corporations. 
B) 100 major U.S.corporations. 
C) 500 representative U.S.corporations. 
D) 1000 representative U.S.corporations. 
A) 30 major U.S.corporations. 
B) 100 major U.S.corporations. 
C) 500 representative U.S.corporations. 
D) 1000 representative U.S.corporations.

Question 8

The nominal interest rate is the

Accepted Answer

A) interest rate corrected for inflation. 
B) interest rate as usually reported by banks. 
C) real rate of return to the lender. 
D) real cost of borrowing to the borrower. 
A) interest rate corrected for inflation. 
B) interest rate as usually reported by banks. 
C) real rate of return to the lender. 
D) real cost of borrowing to the borrower.

Question 9

Retained earnings are

Accepted Answer

A) paid out as dividends. 
B) the amount of revenues a corporation receives for the sale of its products minus its costs of production as measured by its accountants. 
C) the single most important piece of information about a stock. 
D) None of the above is correct. 
A) paid out as dividends. 
B) the amount of revenues a corporation receives for the sale of its products minus its costs of production as measured by its accountants. 
C) the single most important piece of information about a stock. 
D) None of the above is correct.

Question 10

Stock represents

Accepted Answer

A) a claim to a share of the profits of a firm. 
B) ownership in a firm. 
C) equity finance. 
D) All of the above are correct 
A) a claim to a share of the profits of a firm. 
B) ownership in a firm. 
C) equity finance. 
D) All of the above are correct

Question 11

In a closed economy,investment must be equal to private saving.

Accepted Answer

A) True 
 B)False

Question 12

If in a closed economy Y = $11 trillion,which of the following combinations would be consistent with national saving of $2.5 trillion?

Accepted Answer

A) C = $8 trillion, G = $.5 trillion 
B) C = $6.5 trillion, G = $3 trillion 
C) C = $8.5 trillion, G = $2 trillion 
D) C = $9 trillion, G = $.5 trillion 
A) C = $8 trillion, G = $.5 trillion 
B) C = $6.5 trillion, G = $3 trillion 
C) C = $8.5 trillion, G = $2 trillion 
D) C = $9 trillion, G = $.5 trillion

Question 13

The country of Hykenia does not trade with any other country.Its GDP is $20 billion.Its government collects $4 billion in taxes and pays out $3 billion to households in the form of transfer payments.Consumption equals $15 billion and investment equals $2 billion.What is public saving in Hykenia,and what is the value of the goods and services purchased by the government of Hykenia?

Accepted Answer

A) -$2 billion and $3 billion 
B) $1 billion and $3 billion 
C) -$1 billion and $4 billion 
D) There is not enough information to answer the question. 
A) -$2 billion and $3 billion 
B) $1 billion and $3 billion 
C) -$1 billion and $4 billion 
D) There is not enough information to answer the question.

Question 14

Figure 26-2
  
-Refer to Figure 26-2.Which of the graphs in the figure above shows the effects of the government moving from a budget deficit to a budget surplus while also lowering tax rates on interest earnings?

Accepted Answer

A) graph 1 
B) graph 2 
C) graph 3 
D) None of the above is correct. 
A) graph 1 
B) graph 2 
C) graph 3 
D) None of the above is correct.

Question 15

If there is surplus of loanable funds,then

Accepted Answer

A) the supply for loanable funds shifts right and the demand shifts left. 
B) the supply for loanable funds shifts left and the demand shifts right. 
C) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium. 
A) the supply for loanable funds shifts right and the demand shifts left. 
B) the supply for loanable funds shifts left and the demand shifts right. 
C) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

Question 16

Which of the following is not always correct in a closed economy?

Accepted Answer

A) National saving equals private saving plus public saving. 
B) Net exports equal zero. 
C) Real GDP measures both income and expenditures. 
D) Private saving equals investment. 
A) National saving equals private saving plus public saving. 
B) Net exports equal zero. 
C) Real GDP measures both income and expenditures. 
D) Private saving equals investment.

Question 17

Interest rates and investment rise.Which of the following could explain these changes?

Accepted Answer

A) the government runs a larger deficit 
B) the government institutes an investment tax credit 
C) the government replaces the income tax with a consumption tax 
D) None of the above is correct. 
A) the government runs a larger deficit 
B) the government institutes an investment tax credit 
C) the government replaces the income tax with a consumption tax 
D) None of the above is correct.

Question 18

If there is shortage of loanable funds,then

Accepted Answer

A) the supply for loanable funds shifts right and the demand shifts left. 
B) the supply for loanable funds shifts left and the demand shifts right. 
C) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium. 
A) the supply for loanable funds shifts right and the demand shifts left. 
B) the supply for loanable funds shifts left and the demand shifts right. 
C) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

Question 19

Use the following table to answer the following questions.
Table 26-1
  
-Refer to Table 26-1.Assume that the closing price was also the average price at which each stock transaction took place.What was the total dollar volume of Gillette stock traded that day?

Accepted Answer

A) $912,840,000 
B) $91,284,000 
C) $9,128,400 
D) $912,840 
A) $912,840,000 
B) $91,284,000 
C) $9,128,400 
D) $912,840

Question 20

In the small closed economy of San Lucretia,the currency is the denar.Statistics for last year show that private saving was 60 billion denars,taxes were 70 billion denars,government purchases of goods and services were 80 billion denars,there were no transfer payments by the government,and GDP was 400 billion denars.What were consumption and investment in San Lucretia?

Accepted Answer

A) 270 billion denars, 50 billion denars 
B) 260 billion denars, 60 billion denars 
C) 250 billion denars, 70 billion denars 
D) None of the above is correct. 
A) 270 billion denars, 50 billion denars 
B) 260 billion denars, 60 billion denars 
C) 250 billion denars, 70 billion denars 
D) None of the above is correct.

Exam 26: Saving, investment, and the Financial System

A bond is a

Which of the following equations represents national saving in a closed economy?

In the first part of this decade the U.S.government went from a surplus to a deficit.Other things the same,this means the

The slope of the demand for loanable funds curve represents the

Other things the same,bonds are likely to have higher interest rates if they have

Suppose a country had a smaller increase in debt in 2006 than it had in 2005.Then other things the same,we'd expect

The Dow Jones Industrial Average is now based on the prices of the stocks of

The nominal interest rate is the

Retained earnings are

Stock represents

In a closed economy,investment must be equal to private saving.

If in a closed economy Y = $11 trillion,which of the following combinations would be consistent with national saving of $2.5 trillion?

Figure 26-2 -Refer to Figure 26-2.Which of the graphs in the figure above shows the effects of the government moving from a budget deficit to a budget surplus while also lowering tax rates on interest earnings?

If there is surplus of loanable funds,then

Which of the following is not always correct in a closed economy?

Interest rates and investment rise.Which of the following could explain these changes?

If there is shortage of loanable funds,then

Use the following table to answer the following questions. Table 26-1 -Refer to Table 26-1.Assume that the closing price was also the average price at which each stock transaction took place.What was the total dollar volume of Gillette stock traded that day?

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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