Exam 8: Saving, Investment, and the Financial System

Your brother-in-law wants to buy either stock or bonds in Cedar Valley Furniture, but he isn't sure which to buy. Explain how each of his quotes below should affect his choice between the stock and the bond. a."I have reason to believe that people are soon going to find rocking chairs have health benefits." b."I would like to tell people I am part owner of Cedar Valley Furniture." c."I do not want to take on much risk."

National saving is equal to Y - T - C.

What is a bond?

Which of the following bond buyers did NOT buy the bond that best met his or her objective?

In terms of riskiness, how do long-term bonds and short-term bonds compare?

Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if a government goes from a deficit to a surplus.

Which of the following is a secondary advantage of mutual funds?

How does the supply of loanable funds slope?

Stephanie is interested only in the rate of interest and is willing to take a great deal of risk in exchange for a high return. Which of the following bonds she should look for?

How many stock prices are used to compute the Dow Jones Industrial Average?

Many economists believe that if the current income tax were replaced with a consumption tax, then saving, investment, economic growth, and the standard of living of Canadians would increase.

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

In the national income accounting identity showing the equality between national saving and investment, what is the representation of private saving and what is the representation of public saving?

Assuming that other things remain the same, what effect does a government budget deficit have on saving?

In a closed economy, what does national saving equal?

In 1995, MP Bill Gatt proposed that the income tax be replaced with a consumption tax. If his program had been passed, how would the equilibrium interest rate and the quantity of loanable funds have been affected?

Which of the following terms refers to the fall in investment due to government borrowing?

Corporations receive no proceeds from the resale of their stock.

Papa Mario's Pizza Company sells common stock. What type of financing are they using?

Table 8-1 -Refer to Table 8-1. 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?