Exam 8: Saving, Investment, and the Financial System

The country of Nemedia 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 the value of the goods and services purchased by the government of Nemedia?

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

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

Which of the following best describes the pattern in the returns of index funds?

Queen City Sausage stock is selling at $40 per share. It has retained earnings of $2.00 per share, and dividends of $0.50 per share. What is the price-earnings ratio?

Fred is considering expanding his dress shop. Which of the following will happen if interest rates rise?

Which of the following terms refers to the profits paid out to shareholders?

Which of the following does stock represent?

When the government runs a budget deficit, which of the following is most likely to happen?

Other things being constant, when a business issues more stock, which of the following happens?

Henry buys a bond issued by Ralston Purina, which uses the funds to buy new machinery for one of its factories. Who is investing and who is saving?

Table 8-2. -Refer to Table 8-2. Which company had the highest earnings per share?

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

In the language of macroeconomics, what does "investment" refer to?

What does a high price-earnings ratio indicate?

Suppose a poor country decides to institute an investment tax credit. As a result, which of the following is most likely to happen?

When is a budget surplus created?

Which of the following best defines financial intermediaries?

Consider a closed economy. Use the supply and demand for loanable funds model to predict the effects of the following events on interest rates and investment. a.The government introduces a tax credit for savings accounts of up to $5000 per year. b.The government introduces a tax credit for savings accounts of up to $5000 per year, and at the same time it repeals an investment tax exemption provision. c.The government raises the tax rates. d.The government issues bonds worth $10 billion.

PacknCamp Corporation has a price of $50, has issued 2 000 000 shares, has increased its cumulated retained earnings by $2 million, and has a dividend yield of 2 percent. What is the price-earnings ratio of PacknCamp?