Exam 8: Saving, Investment, and the Financial System

If the nominal interest rate is 10 percent and the inflation rate is 4 percent, what is the real interest rate?

In a closed economy GDP = $1300, private saving = $125, government budget deficit = $5, and government spending =$15 (all numbers are in billions). Calculate national saving, taxes, and consumption.

Which of the following is a financial intermediary?

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 was investment in San Lucretia?

Which of the following best defines retained earnings?

Suppose that consumption is 7500, taxes are 1800, and government expenditures are 2200. If national savings are 1500 and the economy is closed, what is the GDP?

If the current market interest rate for loanable funds is above the equilibrium level, which of the following would we expect to happen?

Suppose a country repeals its investment tax credit. Which of the following is most likely to happen in the market for loanable funds?

Suppose that Parliament were to repeal an investment tax credit. Which of the following would most likely happen in the market for loanable funds?

Which of the following bonds would you expect to pay the highest interest rate?

Which of the following refers to the sale of stocks and bonds to raise money?

Explain why the demand for loanable funds slopes downward and the supply of loanable funds slopes upward.

Generally, when economists talk of the "interest rate," which of the following are they talking about?

Suppose the GetUpOffofYourButt exercise chain has revenues of $45 million, costs of $15 million, and currently has issued 10 million shares selling at $90 each. Compute the price-to-earnings ratio. Show your work. Is this ratio relatively high or low? What might an increase in the price-to-earnings ratio indicate?

Lenders sell bonds and borrowers buy them.

Which of the following equations most simply represents GDP in a closed economy?

Which of the two bonds in each example would you expect to pay the higher interest rate? Explain why. a.a Canadian government bond or a Brazilian government bond b.a government of Canada bond or a municipal bond of the same face value and term? c.a 6-month Treasury bill or a 20-year bond d.a Canadian National Railway Company bond or a bond issued by a new record company

What are the basic differences between bonds and stocks?

The country of Meritor uses the merit as its currency. Recent national income statistics shows that it has GDP of 700 million merits, no government transfer payments, taxes of 210 million merits, a budget surplus of 60 million merits, and investment of 100 million merits. What is the sum of its consumption and government expenditures?

What does the slope of the supply of loanable funds curve represent?