Exam 26: Saving, investment, and the Financial System

Suppose that a country has only a sales tax.Now suppose it replaces the sales tax with an income tax that includes a tax on interest income.This would make equilibrium

Which of the following is a financial intermediary?

Identify each of the following acts as representing either saving or investment. a.Fred uses some of his income to buy government bonds. b.Julie takes some of her income and buys mutual funds. c.Alex purchases a new truck for his delivery business using borrowed funds. d.Elaine uses some of her income to buy stock in a major corporation. e.Henrietta hires a builder to construct a new building for her bicycle shop.

In a small closed economy investment is $20 billion and private saving is $22 billion.What is public saving and national saving?

If the nominal interest rate is 5 percent and the rate of inflation is 2 percent,then the real interest rate is

Larry buys stock in A to Z Express Company.Curly Corporation builds a new factory.Whose transaction would be investment in the language of macroeconomics?

Megasoft wants to finance the purchase of new equipment for developing security software called Doors,but they have limited internal funds.Megasoft will likely

Institutions in the economy that help to match one person's saving with another person's investment are collectively called the

What are the basic differences between bonds and stocks?

Public saving is T - G,while private saving is Y - T - C.

Long-term bonds are generally

Suppose that the government were to replace the income tax with a consumption tax so that interest on savings was not taxed.This would make the interest rate

Skyline Chili wants to finance the purchase of new equipment for its restaurants,but they have limited internal funds.Skyline will likely

Other things the same corporate bonds generally have higher interest rates than U.S.government bonds.

Dependable Appliances had a PE ratio of 25,earnings per share of $4,and retained earnings per share of $3.What was its dividend yield?

Thomas Publishing has a share price of $30,retained earnings of $1 per share,and a dividend yield of 5%.What is its PE ratio?

Figure 26-2 -Refer to Figure 26-2.Which of the graphs in the figure above shows the effects of an increase in the tax rate on interest income?

Suppose that you are a broker and people tell you the following about themselves.What sort of bond would you recommend to each? Defend your choices. a."I am in a high federal income tax bracket and I don't want to take very much risk." b."I want a high return and I am willing to take a lot of risk to get it." c."I want a decent return and I have enough deductions that I don't value tax breaks highly."

All else equal,when people become more optimistic about a company's future,the

If Huedepool Beer runs into financial difficulty,the stockholders as