Question 1

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs.We would expect that this would

Accepted Answer

A) raise the demand for existing shares of the stock, causing the price to rise. 
B) decrease the demand for existing shares of the stock, causing the price to fall. 
C) raise the supply of the existing shares of stock, causing the price to rise. 
D) raise the supply of the existing shares of stock, causing the price to fall. 
A) raise the demand for existing shares of the stock, causing the price to rise. 
B) decrease the demand for existing shares of the stock, causing the price to fall. 
C) raise the supply of the existing shares of stock, causing the price to rise. 
D) raise the supply of the existing shares of stock, causing the price to fall.

Question 2

Suppose that in a closed economy GDP is equal to 11,000,Taxes are equal to 2,500,Consumption equals 7,000,and Government purchases equal 3,000.What are private saving and public saving?

Accepted Answer

A) 1500 and -500 
B) 1500 and 500 
C) 1000 and -500 
D) 1000 and 500 
A) 1500 and -500 
B) 1500 and 500 
C) 1000 and -500 
D) 1000 and 500

Question 3

Investment falls and interest rates rise.Which of the following could explain these changes?

Accepted Answer

A) The government went from surplus to deficit. 
B) The government instituted an investment tax credit. 
C) The government reduced the tax rate on savings. 
D) None of the above is correct. 
A) The government went from surplus to deficit. 
B) The government instituted an investment tax credit. 
C) The government reduced the tax rate on savings. 
D) None of the above is correct.

Question 4

Which of the following is correct?

Accepted Answer

A) A large, well-known corporation like Proctor and Gamble would generally use financial intermediation to finance expansion of its factories. 
B) On average, indexed funds outperform managed funds. 
C) Unlike corporate bonds and stocks, checking accounts are a store of value. 
D) Financial intermediaries are institutions through which savers can directly provide funds to borrowers. 
A) A large, well-known corporation like Proctor and Gamble would generally use financial intermediation to finance expansion of its factories. 
B) On average, indexed funds outperform managed funds. 
C) Unlike corporate bonds and stocks, checking accounts are a store of value. 
D) Financial intermediaries are institutions through which savers can directly provide funds to borrowers.

Question 5

Other things being constant,when a business issues more stock,the

Accepted Answer

A) supply of the stock is greater and thus the price will fall. 
B) supply of the stock is less and thus the price will rise. 
C) demand for the stock is greater and thus the price will rise. 
D) demand for the stock is less and thus the price will fall. 
A) supply of the stock is greater and thus the price will fall. 
B) supply of the stock is less and thus the price will rise. 
C) demand for the stock is greater and thus the price will rise. 
D) demand for the stock is less and thus the price will fall.

Question 6

If in the past Congress had taken additional actions to make saving more rewarding,then today it is likely that the equilibrium interest rate

Accepted Answer

A) and quantity of loanable funds would be lower. 
B) and quantity of loanable funds would be higher. 
C) would be higher and the equilibrium quantity of loanable funds would be lower. 
D) would be lower and the equilibrium quantity of loanable funds would be higher. 
A) and quantity of loanable funds would be lower. 
B) and quantity of loanable funds would be higher. 
C) would be higher and the equilibrium quantity of loanable funds would be lower. 
D) would be lower and the equilibrium quantity of loanable funds would be higher.

Question 7

If there is a shortage of loanable funds,then

Accepted Answer

A) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium. 
A) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.

Question 8

When opening a restaurant you may need to buy ovens,freezers,tables,and cash registers.Economists call these expenditures

Accepted Answer

A) capital investment. 
B) investment in human capital. 
C) business consumption expenditures. 
D) None of the above is correct. 
A) capital investment. 
B) investment in human capital. 
C) business consumption expenditures. 
D) None of the above is correct.

Question 9

Suppose that the government finds a major defect in one of a company's products and demands that it take it off the market.We would expect that the

Accepted Answer

A) supply of existing shares of the stock and the price will both rise. 
B) supply of existing shares of the stock and the price will both fall. 
C) demand for existing shares of the stock and the price will both rise. 
D) demand for existing shares of the stock and the price will both fall. 
A) supply of existing shares of the stock and the price will both rise. 
B) supply of existing shares of the stock and the price will both fall. 
C) demand for existing shares of the stock and the price will both rise. 
D) demand for existing shares of the stock and the price will both fall.

Question 10

The supply of loanable funds slopes

Accepted Answer

A) upward because an increase in the interest rate induces people to save more. 
B) downward because an increase in the interest rate induces people to save less. 
C) downward because an increase in the interest rate induces people to invest less. 
D) upward because an increase in the interest rate induces people to invest more. 
A) upward because an increase in the interest rate induces people to save more. 
B) downward because an increase in the interest rate induces people to save less. 
C) downward because an increase in the interest rate induces people to invest less. 
D) upward because an increase in the interest rate induces people to invest more.

Question 11

Consider three different closed economies with the following national income statistics.Country A has taxes of $40 billion,transfers of $20 billion,and government expenditures on goods and services of $30 billion.County B has private savings of $60 billion,and investment expenditures of $50 billion.Country C has GDP of $300 billion,investment of $70,consumption of $180 billion,taxes of $60 billion and transfers of $20 billion.From this information we know that there is a $10 billion deficit for

Accepted Answer

A) only country a. 
B) only country B. 
C) only country C. 
D) all three countries. 
A) only country a. 
B) only country B. 
C) only country C. 
D) all three countries.

Question 12

Jerry has the choice of two bonds,one that pays 3 percent interest and one that pays 6 percent interest.Which of the following is most likely?

Accepted Answer

A) The 6 percent bond is less risky than the 3 percent bond. 
B) The 6 percent bond is a U.S.government bond, and the 3 percent bond is a junk bond. 
C) The 6 percent bond has a longer term than the 3 percent bond. 
D) The 6 percent bond is a municipal bond, and the 3 percent bond is a U.S.government bond. 
A) The 6 percent bond is less risky than the 3 percent bond. 
B) The 6 percent bond is a U.S.government bond, and the 3 percent bond is a junk bond. 
C) The 6 percent bond has a longer term than the 3 percent bond. 
D) The 6 percent bond is a municipal bond, and the 3 percent bond is a U.S.government bond.

Question 13

Which of the following would be an example of direct finance?

Accepted Answer

A) A saver buys shares in a mutual fund. 
B) A saver deposits money into a credit union. 
C) A saver buys a bond a corporation has just issued so it can purchase capital. 
D) None of the above is correct. 
A) A saver buys shares in a mutual fund. 
B) A saver deposits money into a credit union. 
C) A saver buys a bond a corporation has just issued so it can purchase capital. 
D) None of the above is correct.

Question 14

As chief financial officer you sell newly issued bonds on behalf of your firm.Your firm is

Accepted Answer

A) borrowing directly. 
B) borrowing indirectly. 
C) lending directly. 
D) lending indirectly. 
A) borrowing directly. 
B) borrowing indirectly. 
C) lending directly. 
D) lending indirectly.

Question 15

The sale of stocks

Accepted Answer

A) and bonds to raise money is called debt finance. 
B) and bonds to raise money is called equity finance. 
C) to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance. 
D) to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance. 
A) and bonds to raise money is called debt finance. 
B) and bonds to raise money is called equity finance. 
C) to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance. 
D) to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.

Question 16

A mutual fund

Accepted Answer

A) is a financial market where small firms mutually agree to sell stocks and bonds to raise funds. 
B) is funds set aside by local governments to lend to small firms who want to invest in projects that are mutually beneficial to the firm and community. 
C) sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit. 
D) is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks, bonds, or both stocks and bonds. 
A) is a financial market where small firms mutually agree to sell stocks and bonds to raise funds. 
B) is funds set aside by local governments to lend to small firms who want to invest in projects that are mutually beneficial to the firm and community. 
C) sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit. 
D) is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks, bonds, or both stocks and bonds.

Question 17

Which of the following would be included as investment in the GDP accounts?

Accepted Answer

A) the government buys goods from another country 
B) someone buys stock in an American company 
C) a firm increases its capital stock 
D) All of the above are correct. 
A) the government buys goods from another country 
B) someone buys stock in an American company 
C) a firm increases its capital stock 
D) All of the above are correct.

Question 18

The nominal interest rate is 6 percent and the real interest rate is 2 percent,what is the inflation rate?

Accepted Answer

A) 8 percent 
B) 4 percent 
C) 3 percent 
D) None of the above is correct. 
A) 8 percent 
B) 4 percent 
C) 3 percent 
D) None of the above is correct.

Question 19

Which of the following is both a store of value and a common medium of exchange?

Accepted Answer

A) corporate bonds 
B) mutual funds 
C) checking account balances 
D) All of the above are correct. 
A) corporate bonds 
B) mutual funds 
C) checking account balances 
D) All of the above are correct.

Question 20

Which of the following correctly includes the four expenditure categories of GDP?

Accepted Answer

A) consumption, government purchases, investment, net-exports 
B) consumption, investment, depreciation, net-exports 
C) consumption, saving, investment, depreciation, 
D) consumption, government purchases, investment, savings 
A) consumption, government purchases, investment, net-exports 
B) consumption, investment, depreciation, net-exports 
C) consumption, saving, investment, depreciation, 
D) consumption, government purchases, investment, savings

Exam 26: Saving, investment, and the Financial System

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs.We would expect that this would

Suppose that in a closed economy GDP is equal to 11,000,Taxes are equal to 2,500,Consumption equals 7,000,and Government purchases equal 3,000.What are private saving and public saving?

Investment falls and interest rates rise.Which of the following could explain these changes?

Which of the following is correct?

Other things being constant,when a business issues more stock,the

If in the past Congress had taken additional actions to make saving more rewarding,then today it is likely that the equilibrium interest rate

If there is a shortage of loanable funds,then

When opening a restaurant you may need to buy ovens,freezers,tables,and cash registers.Economists call these expenditures

Suppose that the government finds a major defect in one of a company's products and demands that it take it off the market.We would expect that the

The supply of loanable funds slopes

Jerry has the choice of two bonds,one that pays 3 percent interest and one that pays 6 percent interest.Which of the following is most likely?

Which of the following would be an example of direct finance?

As chief financial officer you sell newly issued bonds on behalf of your firm.Your firm is

The sale of stocks

A mutual fund

Which of the following would be included as investment in the GDP accounts?

The nominal interest rate is 6 percent and the real interest rate is 2 percent,what is the inflation rate?

Which of the following is both a store of value and a common medium of exchange?

Which of the following correctly includes the four expenditure categories of GDP?

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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